USD/CAD – CAD plummets on BoC rate decision

December 5, 2018 Share Print 0

The Bank of Canada (BoC) held its benchmark interest rate steady at +1.75% this morning as it warned that low prices for oil from the western province of Alberta could affect the pace of future rate increases.

Oil from Alberta has in recent months traded at a large discount compared with WTI, prompting the provincial government to announce plans to order production cuts earlier this week.

BoC comments:

Policy rate will need to rise to neutral range to achieve inflation target

Pace of rate rises to depend on impact of higher rates on consumption and housing, trade policy Oil Prices, Business Investment, Economy’s Capacity Will Also Factor Into Pace Of Rate Rises

Oil Prices Down Sharply Since October Policy Report

Low Oil Prices Reflect Geopolitics, Global Growth Uncertainty, US Shale Expansion

Canadian Oil Prices Pulled Down Further By Transportation Constraints, Inventory

Activity In Canada’s Energy Sector Likely To Be ‘Materially Weaker’ Than Expected

Canada’s Q3 Expansion In Line With Projections, Data Suggest Less Momentum For Q4

Business Investment Down In Q3, Partly On Summer Trade Uncertainty

Investment Outside Energy Sector To Strengthen After USMCA Signing

Strong Foreign Demand And Investments To Support Export Growth

Household Credit, Regional Housing Markets Appear To Be Stabilizing Following Slowdown

Core Inflation As Expected, Consistent With Economy Operating Close To Capacity
CPI Inflation

Downward Historical Revisions To GDP Could Mean More Room For Non-Inflationary Growth

Global Economic Expansion Moderating ‘Largely As Expected’

Signs Of Trade Conflicts Weighing More Heavily On Global Demand

Cites ‘Encouraging Developments’ At G20 Meetings

Growth In Major Advanced Economies Has Slowed, Activity In US Remains Above Potential

The loonie has taken it on the chin, trading down at C$1.3393 after the announcement. Markets have a “dovish” take on the BoC stand-pat statement. The statement explaining the rationale behind standing pat, at 1.75%, took on a far more cautious tone compared with previous communications. Governor Stephen Poloz will deliver a speech in Toronto Thursday (08:35 EST), which likely will provide more clues on the central bank’s outlook.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Bio
Twitter
Google+
Latest Posts

Dean Popplewell

Vice-President of Market Analysis at MarketPulse

Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments.
He has a deep understanding of market fundamentals and the impact of global events on capital markets.
He is respected among professional traders for his skilled analysis and career history as global head
of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean
has played an instrumental role in driving awareness of the forex market as an emerging asset class
for retail investors, as well as providing expert counsel to a number of internal teams on how to best
serve clients and industry stakeholders.