Canadian interest rates unchanged

Analysts' predictions about interest rates in Canada have worked well. They are still at an unchanged level. As a reminder, they are currently 1,75%. Despite the lack of decisive action in this respect, interest rates practically since the end of the year 2017 have remained at the highest levels for the last decade. They have been significantly raised since then from the 0,5% area. Although the market expected no hikes, the responses to this data were quite pessimistic.

Uncertainty and slowdown in the global economy. USDCAD up.

The most recent data from the market (mainly regarding the economic situation) indicate a slowdown in the global economy. It was more significant and more common than BoC (the Bank of Canada) envisaged in its January report, which included news mainly on monetary policy. Tensions and uncertainty are increasingly reflected in trade. They most effectively affect the confidence and activity of investors in markets with increased exposure to risk. An additional factor of high importance for the market are trade wars, the result of which is still ambiguous. Canadian dollar exchange rate in recent days has reacted by a marked weakening against USD.

Chart USD / CAD, H1

In its presentations, the Canadian Bank has so far only predicted a "temporary" slowdown at the end of 2018 and at the beginning of the year 2019. Current forecasts speak of a permanent rather than transient nature of this process in the economy. 

Target - inflation below 2%

The bank largely expects that inflation will remain below 2%, at least for the greater part of the year 2019. The Monetary Council argues that such a fact is sufficient justification for keeping interest rates unchanged at the current level.

These decisions, despite some obviousness, were, however, strongly rebuffed by the market. The strong position of the US dollar against Canadian was the resultant statement of the Bank that contributed to this depreciation.