Following Wednesday’s Bank of Canada (BoC) decision, the Canadian Dollar (CAD) experienced significant gains, causing USD/CAD to plummet by a full figure to 1.3500. Analysts at Commerzbank have examined the pair’s future prospects.
The BoC’s decision, deemed fairly hawkish, involved keeping its key interest rate steady at 5%. Notably, the BoC emphasized that discussions about rate cuts are premature, maintaining a cautious stance. The official statement also retained references to persistent risks in the inflation outlook, contributing to an overall hawkish sentiment.
Contrary to the expectations of some market participants who anticipated a more dovish tone in the statement, the BoC’s decision aligned with a less accommodative approach. This outcome supports Commerzbank’s perspective that the BoC is unlikely to implement rate cuts until after the U.S. Federal Reserve. Consequently, analysts foresee potential upside for the CAD in the upcoming months.
