As expected, the Bank left the interest rate at 0.25%, although it is worth remembering that BoC was one of the first banks to start the process of monetary policy normalization, so investors are looking for potential signals of the first movement in rates.
The BoC announcement was quite optimistic, but it points to some problems in the economy. According to the central bank, the economy is still 1.5% below pre-pandemic levels (in terms of GDP), influenced by supply constraints. According to the BoC, inflation will be heading back around 2% in the second half of next year. The BoC also points to large uncertainties regarding the Omicron. The bank's guidance may suggest that consideration of a hike will take place between April and September next year, depending on economic and price developments.
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USDCAD is rebounding after the decision. On the one hand, this is the result of a minimal pullback from peaks in oil. On the other hand, investors might have expected clearer signals regarding changes in monetary policy. However, the BoC is adopting a "wait and see" attitude. Nevertheless, it managed to go below the 1.2650 level today, which can be viewed positively by bulls on the Canadian dollar. On the other hand, something of a hammer formation is currently forming, although there is still plenty of time left before the end of today's session. Source: xStation5
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