Yesterday, the Loonie came under selling pressure after the BoC disappointed those expecting officials to lay the ground for a rate increase at one of the Bank’s upcoming gatherings. The pound fell as well after both the headline and core CPI rates for March unexpectedly fell.
The US dollar traded virtually unchanged against five of the other nine G10 currencies on Wednesday. The main loser was GBP, which collapsed after the unexpected slowdown in UK inflation, followed by CAD, which came under selling interest after the BoC rate decision. The NZD ended the day slightly lower as well, even as it spiked up at the time data showed that New Zealand’s quarterly CPI accelerated by more than anticipated. The yoy rate slowed to +1.1% as expected. The sole gainer against the greenback was AUD. It fell overnight after Australia’s employment data showed that the economy gained much less jobs than expected, but recovered all the losses and gained even more, within the next few hours.
Bank of Canada Disappoints CAD-Bulls
One of the yesterday’s highlights was the BoC rate decision. The Bank kept interest rates unchanged at +1.25% as was widely expected, while the statement accompanying the decision had a somewhat more optimistic tone, we think.
The Bank acknowledged the weaker than expected growth at the turn of the year, but it noted that GDP should rebound in the second quarter. Most importantly, officials noted that some progress has been made on the key issues they watch closely, particularly inflation and wage growth. “This progress reinforces Governing Council’s view that higher interest rates will be warranted over time, although some monetary policy accommodation will still be needed to keep inflation on target” the Bank noted. As for the recent developments around global trade, they maintained some concerns, noting that escalating geopolitical and trade conflicts risk undermining the global expansion. Strangely there was no reference to NAFTA.
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