FXStreet (Edinburgh) – Currency Analyst at BTMU Lee Hardman reviewed yesterday’s decision by the BoC to lower its benchmark rate to 0.50%.
Key Quotes
“The Canadian dollar has continued to weaken against the US dollar falling to a new cyclical low after the BoC eased monetary policy further in response to the negative economic shock from the sharp decline in the price of crude oil”.
“The BoC lowered their key policy rate yesterday for the second time this year by 0.25 point to 0.50%”.
“The BoC has become more pessimistic over the outlook for the Canadian economy which it expects to expand by just 1.1% this year and 2.3% next year. In comparison, the BoC had previously expected the Canadian economy to expand by 1.9% this year and 2.5% next year”.
“The hit to investment spending from the lower price of oil is worse than previously expected. The downgrade to the growth outlook was also driven by diminished expectations for non-energy goods exports and temporary weakness in the US economy, although as the BoC acknowledged themselves in their Monetary Policy Report “the extent of the weakness is puzzling”.
“Looser BoC monetary policy as the Fed moves closer to raising rates is likely to result in an even weaker Canadian dollar in the year ahead than we had been forecasting”.
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