5 June 2012 14: 03 GMT the Central Bank to take: Canada maintains its reference to 1.00% rate > the global growth Outlook weakened while Canadian growth is less balanced and Inflation is Well-anchored > CAD slips against major peers


When monetary policy meeting today, the Bank of Canada decided to maintain the interest rates to 1.00% for the thirteenth time in a row, extending its longest break since the 1950s. The target rate has remained unchanged since September 2010, after three consecutive increases of 25% 0.25 basis points. Decision of the Bank of the Canada rate was not surprised the market that it corresponded to the median projections of Bloomberg News survey. The discount rate is proportionally 1.25% and the deposit rate is 0.75 per cent.
The Bank cited weak prospects for global growth and domestic growth slower than expected as the main reasons to defer interest rates increase. As the Bank released its April monetary policy (MPR) report, the global economiccondition has deteriorated in recent weeks. Risks around the European crisis has intensified, including political unrest in Greece and its possible exit of Euro, the fears of banking crisis in Spain and the threat of contagion of debt in the euro area. In addition, the American economy continues recovery at a modest pace and especially in emerging market economies have slowed.
At last Friday's GDP report showed that the economy expanded at an annualized rate of only 1.9% to 2.5% Central Bank forecasts and has remained unchanged since the fourth quarter, growth. The composition of growth has become "less balanced" housing activity is stronger than expected but households continue to add to their burden of debt the modest revenue growth.On the price front, inflation appears to have entered a period of stability with the basic price index should be the objective of 2% of the Bank.
The Bank reiterated in his statement that "persistent force currency" dollar Canadian has been an ongoing challenge for tenth largest economy from domestic currencies of the world reduces foreign demand and hurt net exports. Responsible Canadian policies have continued to support wait them and observe everything to agitate on any withdrawal of this stimulus considerable of monetary policy in economic expansion continues and excess supply is gradually absorbed. "The calendar and the degree of any withdrawal will be"weighted carefully"against national and global economic developments", pointed out the Bank.
Chart 1-minute USDCAD: 5 June 2012
Graph created with strategy trader - prepared by Trang Nguyen
In the minutes following the decision of the Bank of Canada rates, the Canadian Mint immediately reduced gains against its major currencies. As is the 1-minute chart above, the pair USDCAD removed about 40 pips 1.0375 1.0420 within five minutes. Apparently, current weakness in the global economy and stable inflation curbing speculation on if interest rates increase soon. During the writing of this report, the New Zealand dollar was transferred to $1.0375
-Written by Trang Nguyen, DailyFX research team of DailyFX.com
Contact Trang, by e-mail at tnguyen@dailyfx.com
DailyFX provides news forex and technical analysis on trends affecting the world market currencies.
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5 June 2012 14: 03 GMT

# Little Data out of Canada but Fundamentals Continue to Strengthen #

Currency Analyst 07 April 2012 00:39 GMT

Fundamental Forecast for Canadian Dollar: Bullish

• CAD Stronger on Labor Data
• Canadian Dollar Targets Breakout
• March Ivey PMI Misses

The Canadian Dollar had a strong week despite only posting a 0.12 percent against the U.S. Dollar; the Loonie’s strength was evident elsewhere, in particular against the Euro in which it appreciated by 2.05 percent against. The bulk of the Canadian Dollar’s move came on Thursday following an exceptionally strong labor market reading; and in general, the Canadian economy continues to look like a stalwart amid the slow erosion of major developed economies.

Looking ahead, there’s not by way of the economic docket, although data released on Wednesday could be enough to continue the Canadian Dollar’s recent bull-run. Housing starts for March are forecasted to improve slightly, up to 202.0K from 201.1K. While this is not necessarily a substantial improvement, relative to a year ago, the reading is very strong. In fact, over the past five months (October 2011 through February 2012) the Canadian economy has seen a housing starts reading of 199.42K on average; over the same period last year, housing starts averaged 176.56K. A reading above the forecast and the above recent trend averages should yield another strong move by the Loonie.

Considering that’s all of the Canadian marketing moving data for the next week, a brief discussion of longer-term fundamental trends is warranted to give credence to the notion that the Canadian economy is improving and that the Loonie could be primed for a move higher as we head towards the second half of the year. Over the past three months the Canadian economy has seen its unemployment rate drop from 7.6 percent to 7.2 percent. Similarly, while the Canadian economy added 190K jobs in 2011, it has added 81.8K thus far in 2012 – so in just the first quarter of the year, we’ve already witnessed approximately 43 percent of 2011’s labor market growth.

The inflation outlook in Canada is heating up as well, with the year-over-year consumer price index readings trending higher and holding above the Bank of Canada’s target of 2.0 percent. Should impending headline growth data improve alongside the labor market, the BoC would have to consider raising its key interest rate from its current level at 1.00 percent. The continued trend of strengthening Canadian fundamentals could result in a higher yield backing the Loonie and we would expect the currency to appreciate accordingly. But for global growth headwinds, the Canadian Dollar is primed for a strong week next week. – CV