BREAKING: USDCAD ticks higher after BoC rate cut

Bank of Canada announced its latest monetary policy decision today at 2:45 pm BST. Bank was expected to deliver the second 25 basis point rate cut this year, after cutting rates back in June. This would put the main BoC interest rate at 4.50%. Such an outcome was expected by 17 out of 23 economists surveyed by Bloomberg, while money markets were pricing in an almost 90% chance of BoC cutting rates.

There was no surprise when an actual decision was released - Bank of Canada decided to cut rates by 25 basis points. Bank noted that the ongoing excess supply is lowering inflationary pressures but at the same time, price pressures in some important parts of the economy are holding up. BoC also noted that household spending has been weak and that there are signs of slack in the labor market. Nevertheless, BoC still sees economy's potential output growing faster than GDP, meaning excess supply has increased.

BoC expects inflation to average 2.6% in 2024 and to average 2.4% and 2.0% in 2025 and 2026, respectively. This means a slightly increase to 2025 forecast and small decrease in 2026. 2024 GDP growth is seen at 1.2%, down from 1.5% in April forecast, while 2025 GDP growth is seen at 2.1%, down from 2.2% in previous forecast. However, GDP forecast for 2026 was boosted from 1.9% to 2.4%.

USDCAD ticked higher following the decision, although market reaction on the pair may have also been influenced by release of flash PMIs from the United States, which showed beat in services and miss in manufacturing.

USDCAD bounced off the 1.3780 support zone after Bank of Canada delivered another 25 basis points rate cut. Source: xStation5