CAD trades notably lower after BoC rate announcement. Overnight rate target was kept at 1.25% as widely expected. The key takeaway from the statement is that the “higher interest rates will be warranted over time”, but “some monetary policy accommodation” will be needed. “Governing Council will remain cautious in considering future policy adjustments”, as “guided by incoming data”. And the “economy’s sensitivity to interest rates, the evolution of economic capacity” and “dynamics of both wage growth and inflation” will be watched. Basically, these were the elements mentioned in the last paragraph of March statement, just juggled into different place.
In short, BoC is making itself quite clear that it’s not ready to have another rate hike yet.
USD/CAD’s rebound and break of 1.2622 minor resistance suggests that a short term bottom was formed at 1.2526. More consolidation would be seen, with risk of stronger recovery. But still, decline from 1.2942 is expected to resume at a later stage.