The Canadian Dollar, known as the Loonie, saw significant gains following the Bank of Canada’s (BoC) decision on Wednesday, with the USD/CAD pair dropping to 1.3500. Analysts at Commerzbank offer insights into the pair’s prospects.
BoC Decision Analysis
The BoC opted to keep its key interest rate steady at 5%. Additionally, the central bank maintained its stance that discussing rate cuts is premature. The statement also acknowledged ongoing risks to the inflation outlook. Overall, the decision leaned towards a more hawkish tone.
While some market participants anticipated a more dovish stance, the BoC’s decision to hold rates suggests a reluctance to cut rates before the Federal Reserve. This reinforces the view that the BoC will likely implement rate cuts after the Fed. Consequently, Commerzbank foresees potential upside for the Canadian Dollar in the coming months.