USD/CAD Hits 4-Year High Following BOC Rate Decision
The US dollar soared to a four year-high against its northern rival, the loonie, after the Bank of Canada opted to leave interest rates unchanged, while highlighting the country’s stubbornly low inflation.
The USDCAD pair was up 109 pips in North America’s mid-day trade, shattering the psychological 1.10 level. The pair traded at a session high of 1.1079, eclipsing two intraday resistances in the processes. The trend index continues to imply bullishness, although market participants are almost sure the pair has entered overbought territory. Technical support is ascending at 1.0901, 1.0929 and 1.0956.
The Bank of Canada stressed that “inflation is expected to remain well below target for some time, and therefore the downside risk to inflation has grown in importance.” At the same time, “The path for inflation is now expected to be lower than previously anticipated for most of the projection period.”
Canada’s benchmark lending rate has stood at 1 percent since September 2010. While BOC policymakers have been forced to abandon higher-rate bias, the central bank is not expected to lower the overnight rate anytime soon.
The USDCAD pair has advanced nearly 3 percent since January 1. A lower Canadian dollar, it is believed, will help boost Canada’s export sector, which will in turn boost business confidence and investment.
For its part, the US dollar had another quiet day, as the absence of economic data kept forex traders speculating elsewhere. Action for the US dollar resumes Thursday with a report on manufacturing PMI, courtesy of Markit Group. The National Association of Realtors will also report on last month’s existing home sales, while the Chicago Fed is scheduled to release the National Activity Index.
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