CAD News

Bank of Canada Maintains Overnight Rates Target At 1 Per Cent

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

Inflation in Canada has moved further below the 2 per cent target, owing largely to significant excess supply in the economy and heightened competition in the retail sector. The path for inflation is now expected to be lower than previously anticipated for most of the projection period. The Bank expects inflation to return to the 2 per cent target in about two years, as the effects of retail competition dissipate and excess capacity is absorbed.

Bank of Canada leaves door open to rate cut if risk grow : Reuters

(Reuters) - The Bank of Canada signaled on Wednesday it is more concerned about weak inflation than it was three months ago and explicitly stated that its next move on interest rates could be either down or up, depending on how economic data unfolds.

The bank held its main overnight rate unchanged at 1.0 percent, as expected. While it said a more firmly entrenched U.S. recovery and a weaker Canadian dollar would help lift exports this year, its guidance on monetary policy was incrementally more dovish than it had been.

"Although the fundamental drivers of growth and future inflation appear to be strengthening, inflation is expected to remain well below target for some time and therefore the downside risks to inflation have grown in importance," it said.

"The timing and direction of the next change to the policy rate will depend on how the new information influences the balance of risks," it added, acknowledging the possibility of easing monetary policy.

Governor Stephen Poloz had said in an earlier news conference that the bank's stance was neutral and that this meant that rates could fall as easily as rise, but such language has not been put into the bank's official rate statement until now.

The bank omitted a phrase it used in its last two rate announcements that said "the substantial monetary policy stimulus currently in place remains appropriate".

The Canadian dollar fell to a four-year low of C$1.1039 to the greenback, or 90.59 U.S. cents, after the bank's statement, down from Tuesday's close of C$1.0972, or 91.14 U.S. cents.

In a Reuters poll last week, analysts predicted the bank's next move would be a rate hike but not until the second quarter of 2015. Although none of the 37 analysts surveyed actually forecast a rate cut, many bet correctly that the bank would sound a bit more dovish in its statement on Wednesday.

The central bank, led by Poloz since June, dropped a longstanding bias towards hiking interest rates last October. It has not changed its key rate since September 2010.

The bank's increased concern about possible disinflation is shared by policymakers around the world and comes at a time when global markets are highly sensitive to interest rate risk.

The U.S. Federal Reserve has begun scaling back its massive stimulus program and there is talk about the Bank of England possibly raising rates. On the other hand, the European Central Bank and Bank of Japan are firmly in stimulus mode.

The bank sees inflation lower than it had forecast in its last quarterly report in October, with total and core measures around 1 percent in the first half of 2014, at the bottom end of its target range of 1 to 3 percent. But it still sees the inflation rate returning to the 2 percent target in "about two years".

Canadian economic growth sped up in the latter half of 2013, absorbing a little more spare capacity, it said, but it warned there was no sign so far that exports and business investment were replacing indebted consumers as the drivers of growth.

The bank said, however, it is hopeful the sources of growth will broaden. It sees net exports contributing to annual growth in 2014 after being flat or detracting from growth since 2009.

Stronger foreign demand will also prompt businesses to invest more, it said, while consumer spending will be moderate and housing investment relatively unchanged.

The recent depreciation of the Canadian dollar will help in that process, the bank said, as well as exert some upward pressure on inflation.

The Canadian dollar has fallen by more than 6 percent against the U.S. dollar since the bank's October policy shift.

"This depreciation likely reflects the improved growth prospects in the United States, as well as reduced safe-haven effects that had pushed the Canadian dollar higher in the aftermath of the global financial crisis," the bank said.

However, it said the dollar "remained strong" and would continue to pose challenges for noncommodity exports.

The bank raised its forecast of 2014 growth to 2.5 percent from 2.3 percent, following anticipated growth of 1.8 percent in 2013.

2013-01-22 15:00 GMT | [CAD - Overnight Rate]

• past data is 1.00%
• forecast data is 1.00%
• actual data is 1.00% according to the latest press release

if actual > forecast = good for currency (for CAD in our case)

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USDCAD M5 : 100 pips price movement by CAD - Overnight Rate news event :

The Canadian economy unexpectedly shed 7,000 jobs in February, official data showed Friday.

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Bank of Canada's Governor Stephen Poloz said on Tuesday that last month's rate cut will buy the bank some time to assess the economic impacts of the plunge in oil prices.

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2015-05-27 15:00 GMT (or 17:00 MQ MT5 time) | [CAD - Overnight Rate]

• past data is 0.75%
• forecast data is 0.75%
• actual data is 0.75% according to the latest press release

if actual > forecast (or previous data) = good for currency (for CAD in our case)
[CAD - Overnight Rate] = Interest rate at which major financial institutions borrow and lend overnight funds between themselves. Short term interest rates are the paramount factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future.
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Bank of Canada maintains overnight rate target at 3/4 per cent

"The Bank of Canada today announced that it is maintaining its target for the overnight rate at 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

Inflation in Canada continues to track the path outlined in the Bank’s April Monetary Policy Report (MPR). Total CPI inflation is near the bottom of the Bank's 1 to 3 per cent inflation control range, largely due to the transitory effects of sharply lower energy prices. Core inflation remains above 2 per cent, boosted by the pass-through effects of past depreciation of the Canadian dollar, as well as certain sector-specific factors. Seeing through the various temporary factors, the Bank estimates that the underlying trend of inflation is 1.6 to 1.8 per cent, consistent with persistent slack in the economy.

The outlook for the Canadian economy also remains largely in line with the April MPR. While a weak first quarter in the United States has raised questions about that economy’s underlying strength, the Bank expects a return to solid growth in the second quarter. This will help advance the rotation of demand in Canada toward more exports and business investment. Recent indicators suggest consumption in Canada is holding up relatively well, given the impact of lower oil prices on gross domestic income."

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USDCAD M5: 44 pips range price movement by USDCAD - Overnight Rate news event:

The Bank of Canada is expected to keep rates unchanged. Yet the pair has pushed higher with the overall US dollar bullishness in trading over the last couple weeks.

The price stalled right near the 61.8% of the move down from the 2015 high to the 2015 low at the 1.24845 level The 50% and the 100 day MA come in at the 1.2371-76 area. This will be a key level.

Before that key level, there is another interim support level. The 1.2395 is a lower channel trend line on the hourly chart (see below). This is also the low in trading today. On the topside, the channel trend line there comes in at the 1.2512 level (see chart below).

With the price between the channel trend lines (and below the 61.8%), the pair has defined the lines in the sand for a break out. Traders will be looking for surprises that might break the pair.

the source

After reporting a substantial increase in U.S. new home sales in the previous month, the Commerce Department released a report on Monday showing a sharp pullback in new home sales in the month of August. The report said new home sales tumbled by 7.6 percent to an annual rate of 609,000 in August after surging up by 13.8 percent to a revised 659,000 in July.

USD/CAD M5: 38 pips range price movement by U.S. New Home Sales news events

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USDCAD stays in a rising price channel on 4-hour chart and remains in uptrend from 1.3223. As long as the pair is in the channel, the fall from 1.3647 could be treated as consolidation of the uptrend, and further rise to 1.3700 area is possible after the consolidation. Near term support is at the bottom of the channel and the key support is at 1.3410, only break below this level will indicate that the upward movement had completed at 1.3647 already, then the following downward movement could bring price back to 1.3150 area.

USDCAD remains in downtrend from 1.3793, the rise from 1.3387 is likely consolidation of the downtrend. Near term resistance is at the top trend line of the price channel on the 4-hour chart. As long as the pair is in the channel, the downtrend could be expected to continue, and the next target would be at around 1.3300. The key resistance is at 1.3540, only break above this level could signal completion of the downtrend.