🧨CAD strengthens following BoC decision❗

The Bank of Canada left its benchmark interest rate unchanged at the effective lower bound of 0.25 %, as widely expected. Surprisingly, the central bank decided to end its QE program prematurely, tapering its purchases to $0 per month. It was widely expected to taper to $1B/week from $2B/week. The BOC will now only reinvest its existing balance sheet during and will purchase Government of Canada bonds solely to replace maturing bonds.

Below we present highlights of BoC decision:

• In July, BOC saw output gap closing in H2 2022, now sees it in the 'middle quarters' of 2022
• Central bank notes significant uncertainty around output gap
• Sees GDP this year up 5.1% this year and 4.3% in 2022
• Q3 GDP seen at 5.5% vs +7.3% July forecast
• July Canada GDP estimate for 2021 6.0%, for 2022 4.6%
• CPI estimate at 3.4% this year and 3.4% in 2022
• July Canada CPI estimate for 2021 3.0%, for 2022 2.4%

Investors will focus now on BoC  Governor comments at the press conference regarding the economic outlook, inflation and fiscal stimulus.

USDCAD pair fell sharply after today's BoC rate decision and is heading towards major support level at 1.2290. Source:xStation5