CAD Lower Ahead of Bank of Canada Rate Announcement

The Canadian dollar was lower Monday amid falling commodity prices while traders awaited the latest word on interest rates Wednesday from the Bank of Canada.

The loonie lost 0.1 of a cent to 83.46 cents US.

U.S. financial markets were closed for the Martin Luther King, Jr., holiday.

The Canadian central bank is universally expected to leave its key rate at one per cent, where it has been since September 2010. But markets have believed that the bank could move to hike later in the year, after the U.S. Federal Reserve starts hiking its own rates away from near zero.

However, there are questions about how the slide in crude oil prices has hit the Canadian economy and how this could affect central bank thinking about when rates should start to rise.

“The bank (is) poised to deliver its rate decision and revised forecasts with tectonic shifts in some of its underlying assumptions — notably a 4.5 per cent decline in the value of the Canadian dollar and a 40 per cent drop in oil prices since forecasts were last prepared in October,” observed Mark Chandler, Head of Canadian FIC Strategy at RBC Dominion Securities.

via Vancouver Sun

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza