Post by: PocketOption on Mar 13, 2023, 08:31 am
The Canadian dollar has edged higher on Thursday and trading slightly below the 1.38 line. The Canadian dollar is struggling and has declined by 1.5% this week.
Bank of Canada holds rates
As widely expected, the Bank of Canada took a breather at Wednesday’s meeting and maintained the cash rate at 4.50%. For the first time since the current rate-hike cycle began in March 2022, the BoC did not raise rates at one of its meetings. At the January meeting, the BoC raised rates by 25 basis points but signalled that it wanted to take a pause and monitor how previous increases have affected the economy. Unhappy businesses and consumers would have no problem providing some feedback on that question, as they are feeling squeezed from the double-whammy of rising interest rates and high inflation.
The BoC was able to hold rates largely because inflation has been on a downturn and fell to 5.9% in January, down from 6.3% a month prior. The rate statement reiterated the Bank’s projection that inflation will recede to around 3% by mid-2024, close to the target of 2%.
What next for the BoC? The rate statement noted that the Bank was prepared to raise rates if required in order to reach the inflation target, but the money markets are not expecting a rate hike before September. The BoC would like the pause to continue, but the rate decision at each meeting will be dictated by data, particularly employment and inflation reports.
The week wraps up with US nonfarm payrolls on Friday, one of the most important releases on the calendar. After a blowout gain of 517,000 in January, expectations for February have moderated to 205,000. The US released weak employment data today, which may not bode well for the NFP release. The Challenger Job Cuts report noted that US companies laid off 77,700 workers in February, compared to just 15,245 a year earlier. As well, unemployment claims rose to 211,000, up from 190 thousand prior. This was the first time claims rose above 200,000 in eight weeks. If the NFP report is weaker than expected, the US dollar will likely respond with losses as the Fed may have to reconsider its hawkish stance on rate policy.
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USD/CAD Technical
- USD/CAD is testing 1.3785 in support, followed by 1.3690
- 1.3927 and 1.4190 are the next resistance lines
Source: Canadian dollar slips to lowest level since October 2022 after Bank of Canada pauses (https://www.marketpulse.com/20230309/canadian-dollar-slips-to-lowest-level-since-october-2022-after-bank-of-canada-pauses/kfisher)