USDCAD appreciates after the BoC keeps rates steady. In keeping with predictions, the Bank of Canada maintains its current monetary policy and keeps its benchmark interest rate at 4.50%.

USDCAD gains continue; following the BoC’s ruling

Today marked the end of the Bank of Canada’s second meeting on monetary policy in 2023. After increasing borrowing costs at each of its previous nine meetings.

The organization headed by Tiff Macklem decided to maintain its benchmark interest rate at 4.50%, in line with expectations.

In its statement, the BoC noted that the economy has developed as expected.  The labor market is still extremely tight, and that inflation is still high. However, it emphasized that the CPI is anticipated to moderate and fall to around 3%, by mid-year. As a result of weaker growth in the upcoming quarters.

USDCAD mulls BoC still dovish stance

Regarding the policy outlook, the bank kept its dovish policy. Saying that it would maintain borrowing rates at their current levels, provided that economic factors largely followed projections. This could indicate that the terminal rate has been attained, resulting in bad news for the Canadian currency.

The near-term dynamics of monetary policy are likely to favor the US dollar, Which means this month’s recovery of the DXY indicator may continue.

Market reaction

The USDCAD currency pair continued to advance after the central bank announced its ruling, reaching a peak not seen since Nov 2022 close to the 1.3800 mark.

The Canadian dollar is likely to display a bearish tilt in the short term given that the Fed is hell-bent on prolonging its tightening campaign and that the BoC is on hold for the near future. This suggests that USDCAD may shortly test its 2022 highs again.

USDCAD 5-minutes graph

Source: TradingView

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