The Canadian Dollar was supported by the BoC’s rate decision. Overview for 18.01.2018

The USD/CAD pair is getting stable on Thursday morning after rather volatile trading session the day before.

The Canadian Dollar was a “man of the hour” yesterday. The currency strengthened significantly against the USD after the Bank of Canada had decided to increase the benchmark rate. The current quote for the instrument is 1.2445.

So, the Canadian regulator decided to increase the key rate from 1.00% to 1.25% during its January meeting. This decision was quite expected, nevertheless it made investors to become very active. In the comments that followed, the Bank of Canada emphasized that in the future, it would be very careful when increasing the rate again, and such decisions would depend on macroeconomic conditions and NAFTA.

NAFTA is the North American Free Trade Agreement, which has been in effect since 1994. Apart from Canada, the agreement includes the USA (a leader by volumes), Mexico, and several other countries. This year, there are a lot of speculations that the USA may withdraw from NAFTA. If it really happens, the Canadian economy may lose some positive momentum and will have to find new support.

This is exactly the reason why the Bank of Canada is very careful when it comes to predicting possible measures aimed at tightening its monetary policy. No one knows when and how the USA will make the NAFTA decision, but everyone understands quite clearly what consequences such decision may have.

RoboForex Analytical Department