As forecast by the majority of economists, the Bank of Canada opted to leave interest rates unaltered and reinforce its neutral stance regarding further rate movement.
The benchmark rate was held at 1 per cent.
The commentary accompanying the decision was fairly vanilla, in that it repeated much of what was said last month and offered no radical new perspectives.
Governor Stephen Poloz issued the following statement; ‘The fundamental drivers of growth and inflation in Canada continue to strengthen gradually. The Bank judges that the balance of risks remains within the zone for which the current stance of monetary policy is appropriate. […] The timing and direction of the next change to the policy rate will depend on how new information influences this balance of risks. With inflation expected to be well below target for some time, the downside risks to inflation remain important.’
While the BOC did make reference to the recent currency-market volatility inspired by the Ukraine situation, it made no reference to the Canadian Dollar’s exchange rate in particular.
After the BOC made its rate decision the ‘Loonie’ continued to trade lower against the Pound.
The British asset was enjoying a bullish relationship with the majority of its most traded currency counterparts as industry data confirmed UK service sector growth in February and UK composite PMI revealed a rapid pace of employment expansion.
As well as advancing on the Canadian Dollar the Pound gained by the most against the Euro for two weeks and climbed against the US Dollar.
One industry expert said this of Sterling’s upward momentum; ‘There is still short-term upside potential for Sterling in this environment. We are seeing some more encouraging data coming through from the UK, providing signs of a more balanced growth picture.’
While investors will be looking ahead to Friday and the release of Canadian employment figures, tomorrow’s Canadian building permits and Ivey Purchasing Managers Index are also worth noting.
The PMI is forecast to have declined from 56.8 in January to a seasonally adjusted 52.9 in February – still on the right side of the 50 mark separating growth from contraction.
UK developments are also likely to have a considerable impact on the GBP/CAD pairing.
Pound volatility is expected to occur in response to the Bank of England’s policy meeting.
The central bank is expected to leave fiscal policy unaltered.
On Friday the Bank of England will publish its 12 month inflation forecast.
Canadian Dollar (CAD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Canadian Dollar,
,Pound Sterling,0.5412,
Canadian Dollar,,US Dollar,0.9050,
Canadian Dollar,,Euro,0.6592,
Canadian Dollar,,Australian Dollar,1.0080,
Canadian Dollar,,New Zealand Dollar,1.0722,
US Dollar,,Canadian Dollar ,1.1051,
Pound Sterling,,Canadian Dollar,1.8501,
Euro,,Canadian Dollar,1.5212,
Australian Dollar,,Canadian Dollar,0.9920,
New Zealand Dollar,,Canadian Dollar,0.9312,
[/table]
Comments are closed.