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30.05.2019 08:00 AM
USDCAD: the policy of the Central Bank of Canada will remain quite soft

Quite soft statements of the Bank of Canada in relation to monetary policy led to a decrease in the Canadian dollar against the US dollar in trading on Wednesday, May 29.

The decision of the Canadian regulator on interest rates was highly anticipated, as were statements related to future monetary policy.

According to the data, the Bank of Canada left the target value of the one-day interest rate unchanged at 1.75%, saying that the policy of the Central Bank is still dependent on the incoming data. The focus will be on household expenditure and trade data.

As for interest rates, economists believe that the degree of stimulation through monetary policy remains appropriate, and this directly indicates the preservation of current rates at the same level for a long time.

The report also contains good news. The Bank of Canada expects economic growth to accelerate in the 2nd quarter of this year, and recent economic data reinforced the view that the economic slowdown was temporary. It is also expected that consumption and exports will grow in the 2nd quarter, and the energy sector will begin to recover.

The report indicates the risks that may affect the growth potential of the Canadian economy. The regulator is concerned about the problems associated with international trade, which has recently become more. The escalation of trade conflicts further increases the uncertainty of prospects. China's trade restrictions alone have a direct impact on Canadian exports, which slows economic growth.

As for the data on the US economy, in the second half of the day, attention was drawn to the report on the index of manufacturing activity in the area of responsibility of the Fed of the Atlantic region of the United States. According to the report of the Federal Reserve Bank of Richmond, the composite Fed-Richmond manufacturing index in May 2019 rose to 5 points from 3 points in April. In March, the index was 10 points. Economists had expected the index in May to be 5.5 points. It is important that the surveyed companies noted that they remain optimistic about the growth of costs and conditions for business.

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The New Zealand dollar strengthened its position against the US dollar after the publication of the budget report. For example, the government of New Zealand expects the budget to remain in good shape and forecast its surplus of $6.1 billion New Zealand dollars in the years 2022-23. It is also expected that GDP growth in the next four years will average of 2.6%.

Jakub Novak,
Analytical expert of InstaForex
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