Bank of Canada (BoC) maintained the benchmark interest rate to 0.50 percent in the first year of the policy meeting. Market expectations for a rate cut had accelerated in light of the rapid decline in oil prices and weakness in global equity markets. The Canadian dollar followed oil prices on a downward motion and it was speculated that the BoC could lower rates ahead of the market. Tuesday the Canadian government gave no details of the first budget of the Liberal government to squarely focus on the central bank. BoC Governor Stephen Poloz returned the favor as he specifically mentioned that the bank will wait fiscal stimulus before working to further stabilize the Canadian economy.
The announcement of a lack of rate change has managed to reverse the upward trend of USD / CAD was on his way to break above 1.460 and ended trading below the level of 1.45 price after the speech of the Governor Poloz and a recovery in oil prices. West Texas oil was another volatile day as concerns about oversupply remain. The price fell below 26,70 prompting the currencies of commodity to $ tumble, but he managed to recover to around $ 28. In the last 24 hours yet oil was 1.89 percent lower, with no sign of the potential for price stability of the Organization of Petroleum Exporting Countries (OPEC) members or shale producers in the United States.
USD / CAD fell 0.51 percent while the Canadian dollar appreciated by rhetoric from the Bank of Canada. The focus of the market is now on the budget in March to be delivered by the Liberal government. The campaign that won the election highlighted the investment would stimulate growth, but to put Canada on a deficit. It turns out that the Conservative government was already at a deficit, so just a question of how much stimulus is the Prime Minister Trudeau is ready to inject to help Canada to withstand heavy headwinds it faces. Governor Poloz said the BoC was considering a rate cut, but will also be awaiting the effect of fiscal policy before committing another rate cut.
USD / CAD technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.4439 | 1.4468 | 1.4485 | 1.4531 | 1.4560 | 1.4577 |
Canada continues to be close to a recession and the central bank chose to wait as market conditions deteriorated too soon to assess whether the factors are permanent or temporary. The BoC has a limited track cuts it can do, and even if it alluded to unconventional policies, it is awaiting the unveiling of the tax package the government could be quite significant.
forecastThe Bank of Canada reduced growth for 2016 of 2 percent to 1.4 percent given the rout in prices of commodities and the failure of export industries to increase production to compensate for losses. The central bank remains optimistic about the long term that the 2017 forecast has been slightly outperforming 2.5 percent o 2.4 percent.
CAD events to watch this week:
Friday, January 22
8:30 CAD Core CPI m / m
* All times EST
for a full list of events planned for the visit of the foreign exchange market the economic calendar MarketPulse
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