No surprise in Canada: the interest remains unchanged at 0.50% as widely expected. The statement contains some downwards revisions and a postponement of the expectations to close the output gap. This is relatively dovish, but perhaps not as terrible as some had expected.
USD/CAD slips within the range, from resistance at 1.3080 to 1.30 and below. The trough so far has been 1.2984.
From the statement:
While the fundamental elements of the Bank’s projection are similar to those presented in April, the forecast has been revised down in light of a weaker outlook for business investment and a lower profile for exports, reflecting a downward adjustment to US investment spending. Real GDP is expected to grow by 1.3 per cent in 2016, 2.2 per cent in 2017, and 2.1 per cent in 2018. The Bank projects above-potential growth from the second half of 2016, lifted by rising US demand and supported by accommodative monetary and financial conditions. Federal infrastructure spending and other fiscal measures announced in the March budget will also contribute to growth. Despite recent volatility, the Bank expects the underlying trend of export growth to continue, leading to a pick-up in business investment. Higher global oil prices are helping to stabilize Canada’s energy sector and household spending is expected to increase moderately.
The Bank of Canada was not expected to change rates in its July decision. A steady rate of 0.50% seemed appropriate. The lower bound for rates is -0.50% according to a statement made in the past by Stephen Poloz and his team. The Canadian economy is mixed with a slightly disappointing jobs report on Friday. The publication also consists of fresh forecasts.
This is the first post-Brexit decision. However, the Canadian economy is not expected to suffer too much due this European event. On the other hand, the global economy is relatively fragile. Oil, a key Canadian export, has been down from the highs seen earlier in the year but certainly off the lows.
USD/CAD was trading around resistance at 1.3080 ahead of the decision.
Later, oil inventories will impact the loonie.
