- The Canadian Dollar pared losses on Wednesday to rebound 0.2%.
- The Bank of Canada trimmed interest rates by another 50 bps.
- Weakening economic figures and labor data sparked another uptick in rate cuts.
The Canadian Dollar (CAD) bounced on Wednesday, regaining one-fifth of one percent against the Greenback and meagerly recovering from recent lows. US Consumer Price Index (CPI) inflation figures came in broadly as-expected, keeping wider market sentiment on-balance and giving Loonie traders an opportunity to claw back chart paper.
The Bank of Canada (BoC) delivered another outsized interest rate cut, slashing reference rates by 50 basis points. With Canada’s Unemployment Rate hitting multi-year highs, the BoC has been given all of the ammunition it needs to shrug off recent upticks in inflation figures and start delivering further relief to its darling industry, the Canadian mortgage sector. Real estate accounted for roughly 20% of Canada’s overall economy in 2023, and the BoC is hard-pressed to keep housing activity afloat after shock rises in interest rates following the COVID pandemic sent housing costs through the roof.
Daily digest market movers: CAD bounces on BoC rate cut
- The BoC cut Canada’s main interest rate to 3.25% on Wednesday, delivering a 50 bps rate trim.
- The Canadian Dollar bounced on the news, giving Loonie traders hope for a technical recovery.
- Broader market sentiment remains on-balance after US CPI inflation figures matched market expectations across the board.
- Despite CPI figures nailing forecasts, investors will have little to celebrate with headline US CPI inflation accelerating to 2.7% YoY in November, up from the previous period’s 2.6%.
- Meaningful Canadian economic data is done on the release calendar for this week, leaving the Loonie at the mercy of wider market flows for the back half of the trading week.
Canadian Dollar price forecast
Despite a firm bid in the Canadian Dollar post-BoC, bullish flows into the CAD remain limited, and markets pared away much of Wednesday’s intraday gains. Momentum is firmly tilted into the Greenback side on the USD/CAD chart, with the pair barely easing from multi-year highs near the 1.4200 handle.
Loonie bulls will be looking to drag the pair down to 1.4100 before making a break lower toward the 50-day Exponential Moving Average (EMA) near 1.3930.
USD/CAD daily chart
Economic Indicator
BoC Interest Rate Decision
The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.
Read more.Last release: Wed Dec 11, 2024 14:45
Frequency: Irregular
Actual: 3.25%
Consensus: 3.25%
Previous: 3.75%
Source: Bank of Canada
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.
Recommended content
Editors’ Picks
EUR/USD remains offered in the low-1.0900s
The generalised selling pressure continues to weigh on the risk complex, pushing EUR/USD back toward the 1.0900 support level amid a growing risk-off mood, as traders assess President Trump’s reciprocal tariffs and their impact on economic activity.
GBP/USD retreats further and breaks below 1.2800
The US Dollar is picking up extra pace and flirting with daily highs, sending GBP/USD to multi-week lows near 1.2770 in a context where safe-haven demand continues to dictate sentiment amid the chaos of US tariffs.
Gold recedes to four-week lows near $2,950
The persistent selling pressure is now dragging Gold prices to the area of fresh multi-week troughs near the $2,950 mark per troy ounce, always amid the continuation of the recovery in the US Dollar, highr US yields across the curve and unabated tariff tensions.
US stock market suddenly reverses higher after rumor of 90-day tariff pause before sinking again Premium
NASDAQ sinks 4% before shooting higher on tariff pause rumor. CNBC says White House unaware of tariff pause rumor. S&P 500 sinks to January 2024 level. Bank of America cuts its year-end target for S&P 500 by 16%.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.