The USDCAD currency pair was trading up over 30 pips after the Bank of Canada announced it was leaving interest rates unchanged at 4.5%, as expected. The Canadian dollar remained weak against its US peer for the second day as the Fed Chair testified before Congress.
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Investors were looking forward to the BoC interest rate decision, but many expected the central bank to maintain its current interest rate, which is high at 4.5%. The USDCAD currency pair is trading at four-month highs following today’s rate decision as the loonie remains weak.
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The Bank of Canada said it remained open to further rate hikes should inflation rise. According to the latest report, Canadian inflation dropped to about 5% annually, while quarterly inflation was about 3.5%. The bank noted that inflation would have to fall further before it could declare that inflation has been effectively controlled.
The BoC expects inflation to fall to 3% by mid-2023 and sees no reason why this target should not be met. However, the central bank confirmed that it still wants to see inflation back at its 2% target, which could take much longer. On a more positive note, the BoC said it does not see the Canadian economy being in excess.
The USDCAD’s rally was further fueled by the upbeat ADP non-farm payrolls from the US, showing that the country added 242,000 non-farm jobs in February instead of analysts' consensus estimates of 197,000 new jobs.
The ADP employment report indicated that the US jobs market remains robust, which many interpreted as a confirmatory signal for the Fed to continue hiking rates. The US JOTLS job openings report also showed that the country had 10.82 million job openings, much higher than the expected 10.58 million jobs.
The upbeat US jobs data significantly boosted the US dollar as a robust job market could handle further rate hikes from the Fed. Investors will now look forward to Friday’s Canadian labour market report and the US non-farm payrolls report.
*This is not investment advice.
The USDCAD price chart.
The USDCAD currency pair was trading up 34.4 pips (0.24%) at writing after the Bank of Canada interest rate decision.
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