USD/CAD: Interest Rate Decision by the Bank of Canada
Last Wednesday the Bank of Canada left interest rate unchanged at the level of 0.5%, which, at first did not affect exchange rate of the Canadian dollar. However, later the CAD started to rise. The Bank has upgraded economic growth forecast for 2016, stating that new tax and budget measures launched by the Canadian government should have positive impact on the economy.
Nevertheless, the CAD has been rising at a faster pace against the USD than it was envisaged by the Central Bank. The rise in the CAD was caused by the increase in oil prices, which is the main export commodity of the country.
The head of the Bank of Canada, Mr. Poloz said that strong Canadian dollar can put in jeopardy the rise in exports; while oil prices is the leading factor, which causes changes in the Canadian dollar.
Failure of the negotiation between the largest oil producing countries in Doha last weekend has triggered the decline in oil prices, which affected the price of the commodity currencies, including the CAD. Oil prices and commodity currencies have regained after the news about the strike of workers of the oil industry in Kuwait last Sunday. Due to the strike production of oil fell twofold.
Major oil experts believe that it is unlikely that the agreement to reduce oil production will be reached at the next OPEC meeting on 2 June. In this case the price of oil may go back to the level of 30 USD per barrel.
If oil prices go down below the level of 30 USD a barrel, the pair USD/CAD will go back to the uptrend, which has been lasting since mid-2011.
Today, the head of the Bank of Canada, Mr. Poloz will make a speech at 17:00 (GMT+2). At 22:30, American Petroleum Institute (API) will release the data on US oil reserves for the last week. Usually, the rise in the oil reserves negatively impacts oil prices, and consequently, the price of the CAD.
