Bank of Canada beats down CAD

Source: Dukascopy Bank SA
On January 26, the Bank of Canada made a Rate Statement. In general, the bank kept its Overnight Rate at 0.25% and is set to keep its investments in government bonds constant. However, the markets could have reacted to the news that the bank would remove its exceptional forward guidance on its policy interest rate.

Quoting the statement: "The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ %, with the Bank Rate at ½ % and the deposit rate at ¼ %. With overall economic slack now absorbed, the Bank has removed its exceptional forward guidance on its policy interest rate. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant.

In Canada, GDP growth in the second half of 2021 now looks to have been even stronger than expected. The economy entered 2022 with considerable momentum, and a broad set of measures are now indicating that economic slack is absorbed. With strong employment growth, the labour market has tightened significantly. Job vacancies are elevated, hiring intentions are strong, and wage gains are picking up. Elevated housing market activity continues to put upward pressure on house prices."

Released Document

Bank of Canada maintains policy rate, removes exceptional forward guidance

On the release, the USD/CAD reacted by immediately jumping 86 base points or 0.68%.

On a larger scale, the pair has declined to the 1.2500 mark since a peak in mid-December

Initial Reaction

Larger scale situation

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Actual Topics

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