22 January 2014, 16:35  USD/CAD drifts lower

USD/CAD has drifted lower on choppy trading ahead of the Bank of Canada’s interest rate decision this afternoon. The BoC will almost certainly hold rates at 1.0 percent, however, the main focus will be on the accompanying monetary policy report. The BoC is expected to again focus on Canada’s below-target inflation with a dovish bias. However, it is not expected that the central bank will move its stance towards further easing. Bank of Canada Governor Stephen Poloz has previously stated that he wouldn’t move to raise rates until there was an upturn in consumer spending and jobs growth. With Canadian employment falling by 45,000 jobs last month, the economy is a long way from Poloz’s stated conditions for rate hikes. However, he may be given a helping hand by the Fed’s schedule of tapering its asset purchase programme down from its current USD75bn a month. As US bond yields rise, so will Canadian yields, rising Canadian long-term rates. USD/CAD is down 0.05 percent on the session on choppy trading. It is currently trading at CAD1.0963 after creeping to a high of CAD1.0979.

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