- USD / CAD continues to trade well within the recent ranges on either side of 1.2650.
- Some market commentators attribute a modest underperformance to CAD to the lack of signs of a gradual reduction in QE by the BoC.
- Looking ahead, it will be worth looking at BoC’s Schembri comments on Thursday and Canadian employment data on Friday.
The USD / CAD it continues to trade well within the recent ranges on either side of 1.2650 and not far from the 21-day SMA, moving almost to the 1.2650 height. The Canadian dollar underperformed moderately on Wednesday’s G10 currency leaderboard, falling 0.1% against the US dollar. Some market analysts attribute this very modest underperformance to the lack of signs of a gradual QE reduction by the BoC in Wednesday’s monetary policy statement.
Looking ahead, it is worth highlighting two notable risk events in the last two trading days of the week; BoC Lieutenant Governor Lawrence Schembri will speak at 18:30 GMT on Thursday, where he is likely to color Wednesday’s monetary policy decision. StatsCan Will Publish Latest Labor Market Report for February at 13:30 GMT on Friday; Markets expect the Canadian economy to add 75,000 jobs in the month, enough for the unemployment rate to slide back to 9.2% from 9.4% in January.
Summary of Bank of Canada Monetary Policy Decisions
As expected, the Bank of Canada left its monetary policy configuration unchanged, with rates at 0.25% and the asset purchase rate kept at a minimum of CAD 4B per week. The bank’s view of the economy was a bit more optimistic, with the bank saying that the economy is “proving to be more resilient than anticipated to the second wave of the virus.” Therefore, the bank is now forecasting moderately positive growth in the first quarter of 2021 rather than a contraction. Meanwhile, the bank also noted that “improving external demand and rising commodity prices have improved the outlook for exports and business investment.”
Despite the more optimistic view of the economy, the BoC warned that “there is still considerable economic slack.” Therefore, there was no talk of a gradual QE reduction in Wednesday’s statement, as some analysts had been calling for; this appears to have weighed moderately on the loonie. Regarding the QE, the bank reiterated that it will adjust the rhythm of purchases as it “gains confidence in the strength of the recovery.” Some commentators now suggest that this will occur in April; Capital Economics believes that “such a move is likely at one of the upcoming meetings, due to the Bank’s concerns about owning too high a share of outstanding bonds.”
On the other hand, the bank made no attempt to cut Canadian government bond yields, but noted that “global yield curves have steepened, largely reflecting the improved prospects for US growth. ., but global financial conditions remain very accommodative. ” The BoC’s more pass-through approach to recent bond market movements may cause the Canadian dollar to outperform the currencies of countries where a more practical approach is being taken to prevent yields from rising (such as the ECB, the BoJ and the US dollar). RBA).
Technical Levels
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