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BoC Ends Talk of a Possible Rate Increase, Loonie Falls to a Weekly Low

Benjamin Spier

Talking Points:

  • BoC ends talk of a possible rate increase
  • Central bank keeps target interest rate at 1.00%
  • USD/CAD rises to a weekly high

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The Canadian Dollar declined to a weekly low against the US Dollar, as the Bank of Canada sounded significantly more dovish in a text released alongside an unchanged interest rate decision.

The BoC left the target interest rate unchanged at 1.00% in October, as was expected by a majority of Bloomberg surveyed analysts. But, the central bank did not mention the possibility of a rate increase for the first time in more than a year, because of lower inflation risks and worse than estimated economic activity.

The BoC lowered its GDP growth forecast for 2013 to 1.6% from 1.8%, and 2014 growth expectations fell to 2.3% from 2.7%. On inflation, the BoC said that persistent below target inflation means the downside risk to inflation is more significant, making current stimulus levels increasingly important.

The Canadian Dollar slipped 50 pips against the US Dollar on the change in language about the interest rate and the downgrade of economic predictions. USD/CAD continues to trade slightly below 1.0400, and a monthly high at 1.0419 may provide resistance, while support may continue to be seen around the 1.0277 level.

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USD/CAD 1-Minute: October 23, 2013

BoC_Ends_Talk_of_a_Possible_Rate_Increase_Loonie_Falls_to_a_Weekly_Low_body_Picture_1.png, BoC Ends Talk of a Possible Rate Increase, Loonie Falls to a Weekly Low

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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