USD/CAD still in consolidation after the BOC interest rate decision
- The USD/CAD pair is hovering near its lowest level since September 2017.
- The pair reacted to the latest BOC interest rate decision.
- The bank left interest rates and QE policies intact.
The USD/CAD pair is hovering near the lowest level since September 2017 after the latest Bank of Canada (BOC) interest rate decision. The pair is trading at 1.2093, which is about 17% below the highest point in 2020.
Bank of Canada decision
The BOC concluded its two-day monetary policy decision and did what most analysts were expecting. After it started to taper in its April meeting, analysts were not expecting any changes to the policy. As such, the bank left interest rate unchanged at 0.25% as it continues to support the country’s recovery. It also left its quantitative easing policy intact, meaning that it will continue buying bonds worth at least C$3 billion per month.
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At the same time, Tiff Macklem and his team attempted to dampen expectations of a more hawkish policy going forward. This is partly because keeping such a policy will lead to a relatively stronger Canadian dollar, which will hurt the country’s exporters. The bank also reiterated its earlier stance that it will bring its bond purchases to zero before starting to hike interest rates.
The BOC decision came a few days after Statistics Canada published weak employment numbers. The data showed that the country lost thousands of jobs in May while the unemployment rate rose. The bank said:
“With vaccinations proceeding at a faster pace, and provincial containment restrictions on an easing path over the summer, the Canadian economy is expected to rebound strongly, led by consumer spending. Housing market activity is expected to moderate but remain elevated.”
And on Tuesday, numbers revealed that the Canadian exports declined from more than C$50.70 billion in March to C$50.2 billion in April. In the same period, imports fell from more than $52 billion to $49.6 billion. This led to a trade surplus of more than C$0.5 billion.
The weak jobs and trade numbers in April and May were likely because of the lockdowns that governments imposed to curb the pandemic.
Looking ahead, the next key catalyst for the USD/CAD is the upcoming US initial jobless claims and consumer price index (CPI) data. Analysts expect the claims to drop to another post-pandemic low while inflation are set to have risen in May.
USD/CAD technical analysis
The four-hour chart shows that the USD/CAD pair is still in consolidation after the BOC decision. The pair is still between the support and resistance levels at 1.2011 and 1.2140, respectively. It has been in this range in the past few weeks. The pair is also along the 25-day and 15-day weighted moving averages (WMA). Therefore, the pair will likely remain in this range ahead of the US inflation data.