On Wednesday, the BOC became the third major central bank after the RBA and the FED to lower its level of interest. The market widely anticipated the decision as the spread of the coronavirus continues to weigh down on global and domestic growth.
The Governing Council of the Bank of Canada acknowledged that the general headwinds for the global economy have intensified in the last month, and the downside risks to global growth are now more pronounced.
“While Canada’s economy has been operating close to potential with inflation on target, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding. […] Before the outbreak, the global economy was showing signs of stabilizing […]. However, COVID-19 represents a significant health threat to people in a growing number of countries. In consequence, business activity in some regions has fallen sharply and supply chains have been disrupted.”
The virus still hasn’t become as viral in Canada as it is in other countries, with only 49 confirmed cases as of today. Thus, the looser monetary policy that is implemented by the BOC is likely to have more timely and decisive effect compared to the US.
Even still, the Canadian dollar has so far failed to gain any considerable footing against the US dollar. The loonie appears to have found a new temporary equilibrium with the greenback.
The USDCAD is currently consolidating just below the significant resistance level at 1.34188.
USDCAD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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