The Bank of Canada has decided to lower its policy rate by 50 basis points to 1.25% from 1.75% with an aim to help the economy battle the negative impact of the coronavirus outbreak.
With the initial market reaction, the USD/CAD pair spiked above the 1.3400 area and was last seen trading at 1.3395, adding 0.1% on the day.
Key takeaways from the policy statement
"BoC is ready to adjust monetary policy further if required to support growth and keep inflation on target."
"Coronavirus is a material negative shock to Canadian and global outlooks; monetary and fiscal authorities are responding."
"It is becoming clear that Q1 2020 in Canada will be weaker than the bank expected."
"In light of all developments global and Canadian outlooks are clearly weaker than in January."
"Coronavirus represents a significant health threat to a growing number of countries, hitting business activity in some regions and disrupting supply chains."
"This has pulled down commodity prices and CAD; financial conditions globally are becoming less accommodative."
"It is likely as coronavirus spreads, business and consumer confidence will deteriorate, further depressing activity."
"BoC continues to closely monitor economic and financial conditions in coordination with other G7 central banks and fiscal authorities."
"While markets continue to function well, bank will continue to ensure that the Canadian financial system has sufficient liquidity."
"If the drop in Canada's terms of trade is sustained, it will weigh on income growth."
"Business activity in Canada does not appear to be recovering as had been expected after positive trade developments."
"January inflation was stronger than expected due to temporary factors; core measures remain around 2%, consistent with an economy operating close to potential."
"Q4 consumption was stronger than expected, supported by healthy labor income growth; while residential investment continued to grow."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.