Big session for the CAD overnight, hitting weekly highs against the greenback after the Bank of Canada signaled a faster pace of monetary policy tightening. The BOC raised the cash rate by 25bp to 1.75% which was of no surprise to markets who had fully priced this in. The accompanying statement triggered the rally in the Loonie, with the USD/CAD falling to 1.2969 (76.87 US Cents) representing its highest level since October 17. Greenback strength has clawed back some of the gains, with USD/CAD opening this morning at 1.3000, a 0.6% decline on the day.
Focusing on the monetary policy statement, markets interpreted this as a definitely hawkish tone with the BOC dropping it’s referenced to a “Gradual approach” to future rate hikes. They have seemingly replaced this with a ‘neutral stance’, meaning the pace of further hikes will be dependent on how the domestic economy adjusts to the higher rates. They also pointed to the positive benefits of the USMCA deal, reducing trade policy uncertainty in the near term which was having a dampening effect on business confidence. Markets are currently pricing three further hikes for next year.
On the technical front, USD/CAD resistance can now be seen at 1.3083 with any downside moves expected to meet technical support on levels approaching 1.2950 and 1.2900 respectively.