BOC refrains from taper talk, bitcoin eyes record highs

Canadian dollar dips as BoC dovish

The dollar declined after a tame inflation report kept Treasury yields stable.  Runaway inflation concerns will have to wait till next month and that appears good enough to keep demand flowing out of the dollar.

Euro-dollar might start to remain trapped in a tight range as currency traders await tomorrow’s ECB decision.  The eurozone is struggling significantly when compared to the US on both fiscal stimulus and on COVID vaccines.  The ECB could easily justify providing some tweaks to their stimulus measures and that could weigh somewhat on the euro.

The Bank of Canada rate decision surprised some after policymakers refrained from offering signs tightening is nearing.  The Canadian dollar gave up the majority of its gains following the BOC dovish commitment.  QE will stay at CAD4 billion and they maintained their extraordinary forward guidance.

Bitcoin

Bitcoin is making another record run as global risk appetite returns following a tame US inflation report.  One of the core macro drivers for bitcoin is the massive amounts of stimulus that central banks continue to pour into the financial system.  Today, the Bank of Canada reiterated they will not raise borrowing costs until the economy is fully repaired, which could mean they will remain accommodative until 2023.  Tomorrow the ECB will likely provide some tweaks to their policies to provide more support to their struggling economic recovery.  Next week the Fed will likely stand pat on their dovish commitment.  Bitcoin should see steady retail flows as demand for fiat currencies will not really pick up until Europe and emerging markets are easily distributing COVID vaccines and are deeper along in their economic recoveries.

Bitcoin’s bullish outlook remains intact and as long as institutional interest grows and right now that still seems to be the case.

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