The USDCAD pair trades with caution around 1.4360 in Thursday’s European session. The ‘Loonie’ pair faces mild pressure even though the US Dollar has had temporary relief after refreshing the four-month low, indicating some strength in the Canadian Dollar.
The CAD gained sharply after the Bank of Canada (BoC) reduced interest rates by 25 basis points (bps) to 2.75% on Wednesday. The BoC was already expected to ease the monetary policy further as Canadian inflation has remained well below the 2% target in the November-January period.
For fresh cues on inflation, investors will focus on the Consumer Price Index (CPI) data for February, which will be published on Tuesday.
The comments from BoC Governor Tiff Macklem indicated that central bank monetary policy has reached the neutral level, which neither restrict nor stimulate domestic growth. “Our estimate of neutral is centred on 2.75%,” Macklem said in the press conference.
The BoC warned that heightened “trade tensions” could disrupt “job market recovery”, increase “inflationary pressures and curb growth” and guided a moderate growth in the January-March period as trade conflict weighs on “sentiment and activity”.
Meanwhile, the DXY Dollar Index, which gauges the greenback’s value against six major currencies, strives to gain ground after posting a fresh four-month low around 103.20.
The USD Index steadies as the market sentiment turns cautious after US President Donald Trump threatened to respond to counter tariffs proposed by the European Commission.
(Source: OANDA)