Stephen Poloz, the Governor of the Bank of Canada, gave an important speech in Saint John’s. He was cautious about inflation and about the next rate hikes.
The BOC raised rates in July and then in September. No, there was no meeting in between. We have not seen back to back rate hikes for quite some time. This was perceived as a very hawkish stance, especially as they had left the door open to further hikes.
The economic situation improved and this justified removing the stimulus from 2015, according to what the Governor said today. What was that stimulus? Two rate cuts.
So, after removing that stimulus, there is more time until the next move. The BOC still intends to raise rates, but it will now take a more gradual path, like the Fed.
Poloz expressed his perplexion of the slow rise in inflation. While it still is expected to pick up, Poloz was humble enough to admit things have changed. The Fed also sees low inflation as a “mystery“. In any case, the Bank of Canada will move according to the incoming data and there is no predetermined path forward.
This sent the Canadian dollar lower. Dollar/CAD was already flirting with the resistance line at 1.2410 ahead of the publication. His words let the pair fly higher. The top so far is 1.2464.
Further resistance awaits at 1.25 and 1.2565.
More: Buy USD/CAD – Barclays Trade Of The Week
