The Bank of Canada left the interest rate unchanged at 1% as widely expected, but still warns about inflation. There are “downside risks†to inflation (a term the ECB also uses) and they are becoming more significant.
USD/CAD was trading at 1.1070 towards the release of the statement. After an initial jump in USD/CAD, the pair falls. It is important to note that an important figure was also released in the US– updates coming
Data has been mixed in Canada of late. A good example has been the GDP read, which disappointed on a monthly basis but surprised to the upside on a yearly basis.
The relatively good news which the BOC is cautious about is inflation: they did refer to the rise in inflation but preferred to remain worrisome. Do you they want to maintain a low Canadian dollar?
The US ISM Non-Manufacturing PMI badly disappointed, showing contraction in employment. This triggered USD weakness across the board.
