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Bank of Canada Disappoints Canadian Dollar Bulls

Bank of Canada Disappoints Canadian Dollar Bulls

BoC, CAD Analysis and News

  • BoC Maintain View That Economic Slack is Likely Absorded in Middle of 2022
  • CAD Subsequently Disappointed

As widely expected the Bank of Canada stood pat on its monetary policy settings and most notably stuck to its current guidance that economic slack is not expected to be absorbed until the middle quarters of 2022. This had been the trigger for the reaction in the Loonie as we highlighted in our DFX preview, given that there had been raised expectations that the BoC may bring this forward to Q1 in light of the stellar labour market report and thus a decision to stand pat was a slight disappointment for CAD bulls.

On Omicron, the Bank noted that the this could weigh on the expansion by compounding supply chain disruptions and cutting demand for some services. However, this is unlikely to derail the Bank from raising interest rates.

Going forward, while the Loonie is likely to be dicated by risk appetite and oil prices, tomorrow’s speech by Deputy Governor Gravelle will be of importance for the currency and likely to shed more light on the BoC’s outlook.

CAD Reaction to BoC Decision

Source: Refinitiv

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.