The Canadian dollar was very weak yesterday following the Bank of Canada's decision to hold interest rates. While the outcome itself was widely expected, markets were spooked by the Bank's about-face on raising rates later this year and in 2018. The Bank of Canada vowed to be "cautious" regarding future rate hikes, given the uncertainty caused by NAFTA. We pointed out the risks from NAFTA negotiations is an earlier thought piece. The Bank also pointed out that the inflation outlook was weak, especially "following the recent appreciation of the Canadian dollar". Given the current outlook, the BoC does not expect inflation to hit its target until mid-2018.
The USD/CAD exchange rate is currently just below 1.28. The euro is also up versus the Canadian dollar this morning, with EUR/CAD above 1.5120. Lastly, the pound is also up against the Canadian dollar, with GBP/CAD trading above 1.6950.
Yesterday, the Bank of Canada maintained interest rates. The currency fell sharply following the Bank's statement which suggested a "cautious" outlook for future rate hikes given risks from the NAFTA negotiations and a weak inflation outlook.