USD / CAD decline is capped by 1.2300, stable around 1.2350

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  • USD / CAD cuts some of its daily losses, despite the BoC ending QE.
  • USD / CAD tumbled 130 pips once the central bank published its monetary policy decision.
  • The Bank of Canada will begin the “reinvestment phase”, that is, replacing expired bonds with new ones.
  • Bank of Canada: If inflation is stiffer than expected, the bank will act to reduce it.

USD / CAD plunges for the first time this week, down 0.25%, trading at 1.2358 during the American session at the time of writing. 30 minutes before the New York Stock Market session, the Bank of Canada (BoC) released its monetary policy statement announcing the end of its weekly pandemic bond buying program.

Furthermore, the BoC decided to keep interest rates unchanged. However, investors’ expectation towards QE was a reduction in their weekly purchases from C $ 2 billion to C $ 1 billion. Instead, the central bank decided to halt its stimulus, as the threat of stiffer inflation clouds economic growth.

The reaction of the USD / CAD pair to the BoC’s decision

Before the announcement, the pair was trading at 1.2430, but plunged on the announcement 130 pips, hitting the daily low at 1.2300.

BoC Governor Tiff Macklem: We will consider raising rates earlier than we previously thought

An hour after the publication of the Declaration, BoC Governor Tiff Macklem held a press conference. He said that despite the bank’s decision to end the QE program, significant stimulus to the economy would remain in the palace.

The end of QE comes as rising vaccination rates are enabling continued progress in economic recovery in Canada and around the world, “the BoC said in the opening statement.

In addition, the central bank announced that it would end the QE program, but the “reinvestment phase” will begin. The BoC will buy bonds only to replace maturing ones, which means that overall holdings are stable over time.

Additionally, Macklem added that he believes there are good reasons for inflation to decline in 2022, but cautioned that if they see signs of prolonged inflation, they will take steps to curb elevated price pressures.

Technical levels

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