Yesterday, the Canadian Dollar was taking in the gains that it saw on Wednesday, following a positive response from the BoC’s interest rate decisions. The meeting saw the BoC keep the policy rate unchanged, for the ninth straight time. The bank has claimed that CAD’s growth is poised in a position to accelerate over the next couple of years and believe that the best direction would be to set its ‘own course’ going into the new year.
Confidence Grows in the Canadian Dollar Following Recent Outputs
The news that CAD is holding its own and showing enough resilience is giving the BoC the idea to take it in it’s own route through the markets. Deputy Governor Timothy Lane noted that Canada’s economy is near capacity, but also mentioned that the outlook for both domestic and global developments have supported the central bank’s vote that this would be the right decision for the currency. Recently, the BoC has been pressured to rationalise its decision to hold off from easing whilst others like the Federal Reserve have cut rates, this has left CAD with one of the highest rates amongst advanced economies.
Positivity Surrounding CAD Outlook Sees the Currency Rise Whilst Cruising on a Wait-And-See Basis
The speech from Timothy Lane was in line with the optimistic tone which was given on Wednesday in that the Bank of Canada is comfortable and happy to proceed with a ‘wait-and-see’ approach to the monetary policy. CAD was trading yesterday at around CA$1.3177 against USD. This as up 0.2%. The recent moves from the BoC and the standing of CAD have left investors questioning earlier odds on a rate cut. Suggestions for the odds of a move in interest rate over the next week have been cut in half.
BoC Stand Firm on Their Ninth Consecutive Non-Cutting Approach to Their Interest Rates
Whilst giving his speech, Deputy Governor Lane highlighted three reasons why the Canadian central bank has decided to leave the rate untouched for nine consecutive meetings surrounding the economy. He stated the inflation and outlook targets remain on course to be achieved, as well as Canada’s policy rate was lower to begin with and finally, the household debt figures are higher which places a constraint on policy makers. He stated that many have questioned the BoC’s decision, but he suggested that there is no reason for the bank to follow suit with the likes of the Fed Reserve. He also mentioned that Canada and the US usually defer in economic routes and this reflects the differences in the two countries economic conditions.
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