Canadian dollar has restored some of its positions after yesterday’s decision of the Bank of Canada to leave the interest rates unchanged.
Since the beginning of the year Canadian has revealed himself as the weakest currency among the commodity currencies; it has risen in a pair of USD/CAD for more than 700 points. The fall of Canadian currency was caused by a strong decline of oil; oil of Western Canadian Select brand is being traded at around $ 15 per barrel.
Canadian GDP depends directly on the prices of raw materials, that has caused a strong fall of the Canadian with the decrease of oil quotes and the fall of prices for other raw materials. Therefore, it was expected that such sharp decline of raw material market will cause a relief of monetary policy provided by the Bank of Canada, but the Canadian regulator has decided to leave the monetary policy unchanged. That decision was a surprise for the market, that has caused a sharp increase in the Canadian dollar.
However, after a sharp growth, Canadian dollar almost has lost its won back positions; the speech of the head of the Bank of Canada has saved the situation. Although the speech of Stephen Poloz can not be called a positive one, nevertheless, the fact that the interest rate has remained unchanged, continued the strengthening of the Canadian dollar until the end of the trading session.
Such serious strengthening of the Canadian dollar has been the first one since the beginning of the year, but it apparently will not be able to change the orientation of price movement on the graphs. The prices for oil and raw materials remain at low levels, that will continue to put pressure on the Canadian economy. Therefore, the growth of the Canadian currency will be of short duration, because the pressure is remained.
Oleksandr Tikhonov, leading analyst of Premium-Signals.com