USD/CAD Dives after Bank of Canada Upgrades Growth Projections
- USD/CAD drops to a one-month low on bright Bank of Canada outlook
- US dollar pressured across the board for the month of April
USD/CAD Takes a Dive
The US dollar nosedived yesterday against the Canadian dollar after the Bank of Canada (BoC) announced better-than-expected news. In an overall positive statement, the Bank of Canada revealed it will be tapering quantitative easing (QE) and will most likely begin raising rates in the second half of 2022. BoC also revised upward the 2021 GDP growth forecast from 4% to 6.5%.
“Economic activity will be supported by strong foreign demand, relatively high commodity prices, recovery in confidence, and fiscal and monetary policy,” said BoC Governor Tiff Macklem during the press conference. “It may take some time for overall employment to recover; given population growth, around 475k people would need to be hired to reach pre-pandemic employment levels,” he also mentioned.
As a result of the hawkish statements, the Canadian dollar rallied against the US dollar. The USD/CAD pair dropped more than 1.5% on the day, reaching a low of 1.2459. Buyers were able to support the pair to a modestly higher close at 1.2495. On Thursday, the greenback remains pressured as the loonie hovers near the closing levels from yesterday. Presently, the USD/CAD is trading around 1.2497.
US Dollar Pressured Across the Board
The Canadian dollar has been moving relatively sideways against the US dollar for the past two months. Near the end of February, the exchange rate entered into a range between 1.24 and 1.26. In the medium-term, however, the pair has depreciated by over 6.7% for the last six months.
Weighing on the USD/CAD is this month’s weakness in the performance of the US dollar. Broadly, the dollar has been losing strength against a basket of currencies, including the British pound sterling, the euro, the Swiss franc, and the Japanese yen.
Today, traders and investors will be monitoring key US initial jobless claims. The report could create heightened volatility in the USD/CAD pair.
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