Canadian Dollar Weakens As BoC Holds Rate Steady
May 29 2019 - 06:45AM
RTTF2
The Canadian dollar moved down against its major opponents in
the New York session on Wednesday, after the Bank of Canada left
its key rate unchanged, saying that the recent economic slowdown
was temporary and the growth is expected to pickup in the second
quarter.
The BoC maintained the benchmark rate at 1.75 percent, where it
has been since October 2018.
The decision was in line with expectations.
The recent data have reinforced Governing Council's view that
the slowdown in late 2018 and early 2019 was temporary, the bank
said in its accompanying statement.
Hence, the governing council assessed that the degree of
accommodation being provided by the current policy interest rate
remained appropriate.
Regarding future policy decisions, Governing Council would
remain data dependent and assess developments in household
spending, oil markets and the global trade environment, it
added.
The currency traded mixed against its major counterparts in the
European session. While it dropped against the yen and the
greenback, it held steady against the aussie. Against the euro, it
rose.
The loonie depreciated to 1.3547 against the greenback, its
lowest since January 3. The loonie is poised to test support around
the 1.37 mark.
The loonie declined to more than a 2-week low of 0.9368 against
the aussie from yesterday's closing value of 0.9341. The loonie is
seen finding support around the 0.95 region.
The loonie that closed Tuesday's trading at 1.5057 against the
euro dropped to a 5-day low of 1.5088. Next key support for the
loonie is seen around the 1.52 level.
Figures from the Federal Employment Agency showed that Germany's
unemployment climbed sharply in May for the first time in nearly
two years, defying expectations for further decline.
The number of unemployed rose by 60,000 month-on-month, while
economists had expected a decline of 7,000. In April, there was a
fall of 12,000.
The loonie fell to 80.70 against the yen for the first time
since January 4. If the loonie drops further, 78.5 is possibly seen
as its next support level.
Bank of Japan Governor Haruhiko Kuroda said Japan has difficulty
in re-anchoring long-term inflation expectations from inflation
below the target level and suggested examining how best to manage
inflation expectations within the flexible inflation targeting
framework.
Many advanced economies experience very sluggish price
development despite significant improvement in economic activity,
the banker said. This, in turn, raised concerns about the
credibility of inflation targets.
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