Home Forex News USD/CAD Flat As BOC Airs Economy Recovery Concerns

USD/CAD Flat As BOC Airs Economy Recovery Concerns

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  • Record U.S Retail Sales Spike
  • BOC Low Interest Rate Commitment
  • BOC Warning

USD/CAD edged lower, Wednesday morning, even on Bank of Canada Governor, Tiff Macklem warning that the Canadian economy is in a deep hole. The pair edged lower as the U.S registered a record spike in retail sales growth at 17.7%.

BOC Warning

The pair has continued to edge lower after retreating from two-week highs early in the week. The bearish sentiments have coincided with weakness in the U.S dollar amidst growing optimism about global economic recovery in the aftermath of the COVID-19 pandemic.

The new BOC governor raising concerns about Canada’s economic recovery is the latest headwind that could weigh in on the CAD strength against the greenback. According to the governor, the biggest risk to the country’s outlook is the failure of the policy response to have the desired impact in revitalizing the economy.

In a bid to avert the economy plunging into recession, BOC remains well prepared to provide the much needed monetary stimulus. According to Macklem, the central bank is also open to keeping interest rates low to support the recovery. According to the governor, there are no plans to raise Canada’s interest rates.

Bank of Canada has remained aggressive with a wave of stimulus plans to revitalize the struggling economy. The bank has already expanded its balance sheet to C$500 billion. The bank also cut interest rates by 175 basis points to 0.25%, all in the effort to ensure businesses, institutions, and consumers have access to credit. The wave of stimulus plans has gone to strengthen the CAD.

USDCAD Outlook

However, a resurgent dollar continues to curtail CAD strength that has continued to push USD/CAD exchange rate lower. The dollar continues to rebound from three-month lows in the wake of positive economic data in the U.S, affirming the health of the U.S economy.

USD/CAD will once again be in the spotlight when Canada releases the core inflation rate and Inflation rate later in the day. The focus will also be on the release of U.S Business permits and Housing Starts. FED Chair testimony should also sway traders’ sentiments conversely influence USD/CAD outlook.

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