Canadian Dollar: Testing support after BoC hold – BBH
Brown Brothers Harriman’s (BBH) Elias Haddad observes USD/CAD is testing key support at 1.3800, where a break could open further downside. The Bank of Canada (BoC) delivered a hawkish hold, keeping rates at 2.25% but warning about increased upside inflation risks.
Brown Brothers Harriman’s Elias Haddad notes USD/CAD is testing the support level at 1.3800, with a potential break leading to further downside. The Bank of Canada (BoC) gave a hawkish statement, maintaining the interest rate at 2.25%, but expressed concerns about rising inflation risks. Markets had anticipated early rate hikes, but Haddad deems this too optimistic considering inflation being close to the target and ample supply.
The BoC held the policy rate steady at 2.25% for a seventh time, warning of increasing upside inflation risks. Consequently, traders have adjusted expectations, shifting from a January 25 basis point hike to December and bolstering the probability of a 75 to 100 basis point tightening over the next year. This scenario appears excessive, given core inflation is near the target and signs of excess supply persist.
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