Bank of Canada Remains Neutral on the Next Target Rate Change

Talking Points:

• The Bank of Canada remains neutral on the next rate change
• BoC keeps target interest rate unchanged at 1.00%
• CAD/JPY fails to break above a 2-week high

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Despite some initial volatility, the Canadian Dollar remains relatively unchanged in Forex markets after the Bank of Canada announced that the next rate change direction depends on new information.

The BoC announced today that it decided to keep the target interest rate at 1.00% following its March meeting, as was expected by a majority of Bloomberg surveyed economists. The central bank said that it expects inflation to remain well below its 2% target this year, but added that downside risks to inflation remain important. The BoC predicted 2.5% GDP growth in 2014 and stronger growth in 2015. Looking backwards, the BoC reported that both Q4 growth and recent inflation readings were higher than expected.

The BoC did not mention the Canadian Dollar, after the Loonie declined an additional cent against the US Dollar since the central bank said in January that the CAD remains strong.

Because of the overall neutral tone regarding the next interest rate move, the Canadian Dollar didn’t see any immediate lasting reactions to the BoC’s announcement, besides for unwinding some weakness seen before the release. CAD/JPY has risen to a new weekly high today and came within just one pip of testing the 2-week high at 92.78, where resistance may continue to be seen.

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CAD/JPY 1-Minute: March 5, 2014

Chart created by Benjamin Spier using Marketscope 2.0. Add DailyFX Support/Resistance to your charts at FXCM Apps.

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to [email protected] .