The Canadian Dollar’s strong run came to an abrupt end on Wednesday after the Bank of Canada’s final monetary policy meeting of the year.
Its review of incoming economic data noted they were, “in line with October’s outlook, which was for growth to moderate while remaining above potential in the second half of 2017. Employment growth has been very strong and wages have shown some improvement, supporting robust consumer spending in the third quarter. Business investment continued to contribute to growth after a strong first half, and public infrastructure spending is becoming more evident in the data. Following exceptionally strong growth earlier in 2017, exports declined by more than was expected in the third quarter. However, the latest trade data support the MPR projection that export growth will resume as foreign demand strengthens. Housing has continued to moderate, as expected”.
There was nothing too troubling in that assessment. Instead, the CAD was hit by the line that, “While higher interest rates will likely be required over time, the Governing Council will continue to be cautious, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation”.
After its recent strong run and with traders positioned for a hawkish BoC surprise, the CAD fell sharply. USD/CAD rose from 1.2665 to nearly 1.2800. The Canadian Dollar has slipped a little further overnight and opens in London this morning at USD1.2810 and GBP/CAD1.7135.