The Canadian Dollar has an opportunity to outperform a number of its peers, with thanks most recently to the Bank of Canada’s tone set at their rate decision.
As expected the central bank left interest rates unchanged at 0.25%, the gains for CAD came as the new Bank of Canada governor Macklem announced some scaling back in the bank’s market operations.
The operations that are still being conducted by the BOC are in response to the negative economic impact of Coronavirus. They were injecting money into the markets, a form of QE - Quantitative easing, to try and stimulate the economy.
In terms of the move from the new governor, it is somewhat less dovish, so perhaps he brings more of a neutral-hawkish tone to the Bank of Canada’s decisions, which is CAD POSITIVE.
The concluded statement of the BOC:
As market function improves and containment restrictions ease, the Bank's focus will shift to supporting the resumption of growth in output and employment. The Bank maintains its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.
Elsewhere, another influencer to be aware of for CAD (oil correlation), is OPEC+ developments, OPEC and non-OPEC allies, had been expected to hold their next meeting today - Thursday. There is the growing expectation that OPEC kingpin Saudi Arabia and non-OPEC leader Russia were thought to have tentatively agreed on a one-month extension to production cuts. However, sources, reported the date of a meeting to finalize the deal remains uncertain.
What does this all mean for CAD?
There is room for Canadian to gain against its peers, given the BOC is scaling back some of its operations, while other central banks are still pumping into the economy. However, gains may be capped near-term by the OPEC uncertainty. If a date is set and a deal can be finalised, this will be observed as a CAD positive.
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