USD/CAD – CAD plummets on BoC rate decision

The Bank of Canada (BoC) held its benchmark interest rate steady at +1.75% this morning as it warned that low prices for oil from the western province of Alberta could affect the pace of future rate increases.

Oil from Alberta has in recent months traded at a large discount compared with WTI, prompting the provincial government to announce plans to order production cuts earlier this week.

BoC comments:

  • Policy rate will need to rise to neutral range to achieve inflation target
  • Pace of rate rises to depend on impact of higher rates on consumption and housing, trade policy Oil Prices, Business Investment, Economy’s Capacity Will Also Factor Into Pace Of Rate Rises
  • Oil Prices Down Sharply Since October Policy Report
  • Low Oil Prices Reflect Geopolitics, Global Growth Uncertainty, US Shale Expansion
  • Canadian Oil Prices Pulled Down Further By Transportation Constraints, Inventory
  • Activity In Canada’s Energy Sector Likely To Be ‘Materially Weaker’ Than Expected
  • Canada’s Q3 Expansion In Line With Projections, Data Suggest Less Momentum For Q4
  • Business Investment Down In Q3, Partly On Summer Trade Uncertainty
  • Investment Outside Energy Sector To Strengthen After USMCA Signing
  • Strong Foreign Demand And Investments To Support Export Growth
  • Household Credit, Regional Housing Markets Appear To Be Stabilizing Following Slowdown
  • Core Inflation As Expected, Consistent With Economy Operating Close To Capacity
    CPI Inflation
  • Downward Historical Revisions To GDP Could Mean More Room For Non-Inflationary Growth
  • Global Economic Expansion Moderating ‘Largely As Expected’
  • Signs Of Trade Conflicts Weighing More Heavily On Global Demand
  • Cites ‘Encouraging Developments’ At G20 Meetings
  • Growth In Major Advanced Economies Has Slowed, Activity In US Remains Above Potential
  • The loonie has taken it on the chin, trading down at C$1.3393 after the announcement. Markets have a “dovish” take on the BoC stand-pat statement. The statement explaining the rationale behind standing pat, at 1.75%, took on a far more cautious tone compared with previous communications. Governor Stephen Poloz will deliver a speech in Toronto Thursday (08:35 EST), which likely will provide more clues on the central bank’s outlook.

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    Dean Popplewell

    Dean Popplewell

    Vice-President of Market Analysis at MarketPulse
    Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
    Dean Popplewell