Before the Bank of Canada delivered its rate decision the Canadian Dollar was weaker against the Pound as a surprising decline in UK unemployment helped the British asset advance on the majority of its most traded currency counterparts.
The ‘Loonie’ edged even lower against Sterling during the North American session as the Bank of Canada left interest rates unaltered but delivered a dovish policy statement.
The CAD/USD pairing dipped towards a four-year low as the benchmark interest rate was held at 1 per cent and investors speculated on the possibility of an additional rate cut occurring this year.
BOC Governor Stephen Poloz asserted; ‘The strengthening of the global economy and recent depreciation of the Canadian Dollar should foster a broadening of the composition of growth. The timing and direction of the next change to the policy rate will depend on how new information influences this balance of risk.’
In recent months Canadian employment figures have disappointed expectations and signs have been pointing toward a cooling in the nation’s housing sector.
Investors will now be focusing on this week’s Canadian consumer price inflation data. If the report shows that inflation remained below the BOC’s 1 – 3 per cent target range for a third month it will increase the odds of a BOC rate cut and pile even more pressure on the Canadian Dollar.
As forex strategist Ian Gordon notes; ‘We see the risk of a rate cut over the coming months if inflation does fall substantially below that 1 per cent lower bound of the bank’s target inflation range. It will solidify the view the Canadian Dollar will continue to weaken as the Bank of Canada deals with that low inflation.’
While the BOC didn’t overtly adopt a dovish attitude and make reference to further rate cuts, it did advocate its support for a lower ‘Loonie’ – a fact which is likely to keep pressure on the Canadian Dollar in the days ahead.
Tomorrow a lack of influential economic data for the UK could restrain the Pound’s movement, but further Canadian Dollar volatility is likely to occur in response to Canadian retail sales figures.
If sales increase by 0.3 per cent in November, month-on-month, as forecast by economists the ‘Loonie’ could recover some ground.
Sales fell by 0.1 per cent in October.
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,0.5454,
Canadian Dollar,,US Dollar,0.9069 ,
Canadian Dollar,,Euro,0.6666,
Canadian Dollar,,Australian Dollar,1.0239,
Canadian Dollar,,New Zealand Dollar,1.0947 ,
US Dollar,,Canadian Dollar ,1.1060 ,
Pound Sterling,,Canadian Dollar,1.8303 ,
Euro,,Canadian Dollar,1.4978,
Australian Dollar,,Canadian Dollar,0.9720,
New Zealand Dollar,,Canadian Dollar,0.9127 ,
[/table]
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