USD/CAD rises further as BoC opens doors to a rate cut
- Canadian dollar tumbles and holds on to losses after BoC meeting.
- BoC Governor Poloz: The door is obviously open to an interest rate cut
The USD/CAD pair rose further and printed a fresh four week high at 1.3151 after Bank of Canada’s Poloz press conference. Near the end of the session, the pair trades at 1.3145, holding to most of its gains. It is the best performance for USD/CAD in a month.
Blame it on the BoC
At today’s meeting, the Bank of Canada decided, as expected, to keep the overnight interest rate unchanged at 1.75%. In the statement, the BoC was more dovish than market expectations and triggered a decline of the Canadian dollar across the board. It removed the reference to the current rate as “appropriate” and downgraded growth projections for the fourth quarter.
During the press conference, BoC Governor Stephen S. Poloz said the “door is obviously open to an interest rate cut”. The next move will depend on data. He added that interest rates are still really low.
The loonie tumbled after the statement and also following the press conference. The decline in crude oil prices also contributed to the slide, although the key driver was the BoC meeting.
“The CAD took a turn for the worse following the BOC's dovish pivot. With downward revisions to growth and an acknowledgement that they will monitor whether this slowdown is more persistent than forecast in determining the future path of policy has us comfortable in our long USD/CAD position that we initiated at the start of this year. Indeed, we had warned that the market was not giving enough credence to the deterioration in Q4 data”, commented analysts at TD Securities. They have a target for USD/CAD at 1.33.