Today's BoC decision to raise interest rates by 25 bp came in line with market expectations, however signals regarding the end of aggressive tightening cycle surprised many traders. This in turn lead to significant depreciation of Canadian currency. USDCAD continues to inch higher after latest comments from BoC's governor Macklem, who said:
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This is a conditional pause, dependent on the economy developing broadly and in line with forecasts
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It is far too early to discuss interest rate cuts
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Economy didn't cool as much as expected in H2
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It will not feel good if the economy stalls, but we need this period of no growth
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Lower gasoline prices are welcome but prices of essentials continue to rise too quickly
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Service inflation will take longer to decline.
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If we need to do more to get inflation to 2% target, we will
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If upside risks materialize, we will raise rates further
USDCAD broke above major resistance at 1.3410 after the latest BoC decision, which now acts as support. As long as the pair sits above this level, the upward move may accelerate towards recent highs at 1.3520. On the other hand, if sellers manage to regain control, then another downward impulse towards key support at 1.3320 may be launched. Source: xStation5
