- USD / CAD is back at the 1.2800 level after a recent choppy trade.
- The BoC held interest rates as expected, while the CAD has been hit by a drop in crude oil prices following the EIA inventory data.
The USD / CAD has been oscillating in recent trading, dropping just above weekly lows at 1.2760 immediately following the Bank of Canada interest rate decision, before reversing above the 1.2800 level amid price weakness crude oil and a rebound in the US dollar. However, on the day, the pair is still trading with losses of around 0.1% or 10 pips.
BoC takes the patient approach
The Bank of Canada kept rates at 0.25% and reiterated intentions to keep interest rates at these low levels until at least 2023 as expected on Wednesday, while maintaining the pace of monthly asset purchases at $ 4B as expected. and reiterated the intentions to continue these purchases until the recovery is well under way.
The CAD’s initial slightly positive reaction to the rate decision could have been the upbeat tone of comments on the economy and its outlook; The BoC said that while the rebound in the global and Canadian economies since publishing its last batch of forecasts in October has been in line with expectations, the vaccine news is providing some light at the end of the tunnel regarding the pandemic and economic momentum. in the fourth quarter it appears to be stronger than expected in October.
However, the CAD reaction was short-lived, as it is not surprising that the bank acknowledges that events since October (such as the success of the Covid-19 vaccine and Joe Biden’s electoral victory) have improved the outlook. world. “Overall, we think the vaccine news provides more than enough light at the end of the tunnel for the BoC to see through the small growth disappointments stemming from the second wave,” said Josh Nye of RBC.
Crude Oil Prices Slump Following Huge EIA Inventory Buildup
Crude oil prices were affected by a much larger than expected buildup of headlines in the EIA crude oil inventory data. Crude stocks rose 15.189 million barrels last week versus expectations for a drop of 1.424 million. Gasoline and distillates inventories also posted much higher than expected accumulations of 5,222M (exp. 1,414M) and 4,222M (exp. 2,271M) respectively, while US production remained stable at 11.1M barrels per day.
Ahead of the data, WTI is trading higher on the day just above the $ 46.00 level, but in the minutes after, it fell to the $ 45.00 level. As it stands, WTI is now trading closer to $ 45.50 and is only down around 20 cents or 0.3% on the day, although this has still acted as a drag on USD / CAD.
USD / CAD flirts with 1.2800 but remains within recent ranges
USD / CAD may have returned to the 1.2800 level, but the pair remains within the recent ranges. On the downside, the price action is resting at 1.2760 and on the upside, the action is limited around 1.2820.
4 hour chart
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