Loonie Tumbles as BOC Holds Interest Rate
The Canadian dollar fell for the second straight session as the Bank of Canada decided to maintain the overnight lending rate at 1 percent.
The decision, which marked the 29th consecutive meeting interest rates were left unchanged, came amid speculation policymakers were attempting to drive down the loonie. The Canadian dollar has been supported in recent weeks amid a spate of economic data showing stronger recovery in terms of employment, trade and overall GDP.
The BOC, still concerned with soft inflation, said “higher consumer energy prices and the lower Canadian dollar will exert temporary upward pressure on total CPI inflation, pushing it closer to the 2 per cent target in the coming quarters.”
The BOC also added, “We expect total CPI inflation will remain close to target throughout the projection, even as upward pressure from energy prices dissipates, because the impact of retail competition will gradually fade and excess capacity will be absorbed.”
The Canadian dollar was trading at 0.9081 US in the morning session, down 28 pips from its previous close. The USDCAD currency pair was trading at 1.1015, up 0.3 percent. The pair was likely to find support at 1.0958 and face resistance at 1.1070, the high from April 1.
Statistics Canada will report on consumer price inflation before the markets break for Good Friday. Annualized March inflation is expected to have risen 1.4 percent, estimates show. Core consumer prices, which will come courtesy of the Bank of Canada, are expected to have risen 1.3 percent annually.
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