The Overnight rate in Canada has been kept unchanged at the current level of 1.75 per cent; however, the monetary policy statement of the Bank of Canada sounds much more downbeat compared to the projections of the Reserve Bank of Australia. The BOC commented on the exerted downside risks to growth, stemming from the protracted US-China trade war, and commented on the likelihood of contracted growth in the next fiscal quarter.
“As the US-China trade conflict has escalated, world trade has contracted and business investment has weakened. This is weighing more heavily on global economic momentum than the Bank had projected in its July Monetary Policy Report (MPR). […] In Canada, growth in the second quarter was strong and exceeded the Bank’s July expectation, although some of this strength is expected to be temporary. The rebound was driven by stronger energy production and robust export growth, both recovering from very weak performance in the first quarter.” [source]
The Bank’s projections for waning growth in the near future in addition to the observed solid growth in the United States, ‘supported by consumer and government spending’, had noticeable implications for the forex market.
The USDCAD decreased with 0.85 per cent during yesterday’s trading session after the crucially important resistance level at 1.33300, which is also the 61.8% Fibonacci retracement level, contained the price action. The pair traded temporarily above that level, prior to the BOC’s monetary policy decision, but ultimately it came to no avail as the price tumbled to 1.32189 before the day’s end.
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