USD/CAD rises after Bank of Canada rate cut

The Bank of Canada lowered interest rates earlier on Wednesday and the Canadian dollar has lost ground against its US counterpart. In the North American session, USD/CAD is trading at 1.3713, up 0.28%.

Bank of Canada cuts cash rate to 4.75%

The Bank of Canada took the plunge and cut interest rates for the first time in over four years, lowering the cash rate by 0.25% to 4.75%. The BoC is the second major central bank to lower rates, after the Swiss National Bank did so in March.

The BoC statement defended the cut, noting that underlying inflation continued to decline and that BoC members were confident that inflation would continue to move towards the 2% target. The statement also said that the first quarter economic growth was lower than expected. At the same time, the BoC warned that risks remained to the inflation outlook and that the central bank would keep a close watch on core inflation.

Governor Macklem didn’t provide much in the way of hints about future policy. In remarks prepared for a news conference, Macklem said that the BoC would make rate decisions one meeting at a time and that it is was reasonable to expect further rate cuts if inflation continued to decline. Perhaps Macklem will provide some insights at today’s press conference.

In the US, the ADP employment report eased to 152,000 in May, its weakest pace of growth in three months. This was lower than the revised gain of 188,000 in April and shy of the market estimate of 175,000. The ADP release is not considered an accurate guide to the nonfarm payrolls report on Friday, but still attracts attention due to its proximity to the nonfarm payrolls release.

USD/CAD Technical

• USD/CAD is testing resistance at 1.3709. Above, there is support at 1.3743
• 1.3665 and 1.3631 are the next support level