CAD Drops After BoC Monetary Policy Meeting, Crude Oil Likely to Blame

May 30,2019 08:33   Source:Earnforex

Canadian coins on Canadian dollar billsThe Canadian dollar was largely soft today, though it has managed to trim its losses by now, even gaining on the euro. The decline of crude oil prices is likely to blame for the poor performance of the currency as domestic news did not bring anything particularly bad.

The Bank of Canada left its main interest rate at 1.75%, as was largely expected. The central bank maintained neutral tone in the statement. On a positive side, the bank stated that the economic slowdown at the start of the year was likely transitory, and economic growth should pick up, boosted by relatively high prices for crude oil:

Recent Canadian economic data are in line with the projections in the Bank’s April Monetary Policy Report (MPR), with accumulating evidence that the slowdown in late 2018 and early 2019 is being followed by a pickup starting in the second quarter. The oil sector is beginning to recover as production increases and prices remain above recent lows.

Unsurprisingly, on the negative side were concerns about trade wars, though the USMCA was a good news:

The global economy is also evolving largely as expected since April, although the recent escalation of trade conflicts is heightening uncertainty about economic prospects. In addition, trade restrictions introduced by China are having direct effects on Canadian exports. In contrast, the removal of steel and aluminum tariffs and increasing prospects for the ratification of CUSMA will have positive implications for Canadian exports and investment.

As for Canadian macroeconomic data, Statistics Canada will release the current account figure tomorrow, though the markets’ attention is largely focused on the GDP print due to release on Friday. Gross domestic product declined 0.1% in February, month-on-month. The upcoming March figure can have a big impact on the loonie.

USD/CAD was up from 1.3493 to 1.3546 before pulling back to 1.3513 by 21:04 GMT today. EUR/CAD rallied from 1.5057 to 1.5087 intraday but has retreated to 1.5043 since then. CAD/CHF went down from 0.7466 to 0.7447, and its intraday low was at 0.7433.

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