Summary:

• Bank of Canada keep rates on hold at 1.25%
• Statement cautions on growing uncertainty in trade
• USDCAD looking to make significant break higher

The Bank of Canada have kept rates on hold following their latest monetary policy meeting as was widely expected, but some cautious rhetoric surrounding trade has weighed on the Loonie in the immediate reaction.

There was very little expectation that the Bank of Canada would change their overnight interest rate during their latest meeting, and they duly obliged in keeping it at 1.25%. However, this wasn’t the most newsworthy event in the release with the accompanying statement providing some interest comments.

The most notable of all was a line which read “Trade developments are an important and growing source of uncertainty” in what is quite clearly a response to the recent rhetoric of Donald Trump. other selected comments can be found below:

• Higher rates likely warranted over time, but some continued policy accommodation will likely be needed to keep economy close to potential, inflation on target
• Canada’s Q4 GDP slower than expected due to higher imports; 2017 GDP in line with banks projections
• Wage growth has been firm but lower than typical in economy with no labor market slack

The Canadian dollar has slid in the past hour to now trade lower against all of its peers barring the CHF. The market has seemingly focused on these remarks relating to the potential trade wars.  

A longer term view of the USDCAD reveals that the pair is attempting to make a fairly significant break higher with the 1.2916 level an key prior swing level. Several attempts to break above 1.2916 last year were met with rejections but in recent days the market has made a break and crucially been able to close above there. Should this breakout gain traction then a large move to the upside may lie ahead.

 The 1.2916 level is key for USDCAD and if the pair can remain above this then further gains may lie ahead. Source: xStation