In one of its regular monetary policy meetings, the Governing Council of the BOC decided to maintain the interest rate unchanged at 0.25 per cent but to increase the scope and reach of its asset-purchasing program.
The Central Bank revised down its outlook on the Canadian economy from its previous emergency meeting, which took place in Late-March.
“The Canadian economy was in a solid position ahead of the COVID-19 outbreak, but has since been hit by widespread shutdowns and lower oil prices. One early measure of the extent of the damage was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April some six million Canadians had applied for the Canada Emergency Response Benefit.”
The BOC announced it would be increasing the liquidity in Canada by up to $60 billion in the coming weeks, and that it is 'further enhancing its term repo facility to permit funding for up to 24 months’. Additionally:
“Under its previously-announced program, the Bank will continue to purchase at least $5 billion in Government of Canada securities per week in the secondary market, and will increase the level of purchases as required to maintain proper functioning of the government bond market. Also, the Bank is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40 percent, effective immediately.”
The Canadian dollar reacted to the news on Wednesday for all of this extra liquidity that is going to be pumped into the economy in the coming weeks, by depreciating against the greenback.
The USDCAD jumped by 1.67 per cent during the daily trading session, and the pair is currently consolidating just above the middle line of a major regression channel that is visible on the daily chart.
USDCAD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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