Citing a looming slowdown in Canada's long housing boom and a weaker outlook for exports, Bank of Canada Governor Stephen Poloz said the had considered easing . He said that uncertainty around the U.S. election and business investment, the Canadian housing market, and the commodity cycle kept the bank from adding stimulus.
Poloz revealed the stimulus discussion in his opening statement to reporters more than an hour after publication of the rate decision, wrong footing financial markets that were not expecting the dovish shift.
It was the second time in six months the admitted it had considered adding more stimulus to the economy to counter persistent disappointments in growth and exports.
Poloz later told a Senate committee that the bank did not have a lot of traditional tools left to boost the economy, but could use unconventional measures like forward guidance, asset purchases, quantitative easing and negative interest rates.
The bank's comments cemented the belief that Canada will not raise rates in the foreseeable future, and could even cut rates, even with the U.S. expected to hike further. Our economists do not expect further monetary easing in Canada in the coming months.
The CAD had strengthened to a nearly four-week high after a shock drop in U.S. crude inventories led to a surge in prices for oil yesterday. But those gains were erased after the said it had considered to ease its policy.
In our opinion the long-term trend on the USD/CAD depends on trends in oil market. Oil prices fell on Thursday on profit-taking after markets rallied the previous day due to a draw in U.S. stocks and an expectation of an OPEC-led cut in production, but the overall market mood remains . The OPEC plans to meet on November 30 and hopes to decide on a half a million to 1 million barrels per day oil production cut, and the producer cartel hopes that non-OPEC exporters, especially Russia, will cooperate. Saudi Arabia's Energy Minister Khalid al-Falih said that the cut will help reduce a huge overhang of supplies and stimulate new investments in the sector.
GrowthAces.com - Daily Forex Trading Strategies