The U.S. dollar ended the week at six year highs against the Canadian dollar on Friday after Canada’s central bank cut borrowing costs for the first time since 2009 in an unexpected move on Wednesday.
The BoC shocked markets when it lowered its overnight target rate to 0.75% from 1.0%, in response to the recent sharp drop in oil prices. The central bank said the recent rout in oil, which has halved in the past six months, would be negative for growth and underlying inflation in Canada. It also expects lower oil prices to boost global economic growth, especially in the U.S. Crude Oil is Canada’s largest export.
The BoC said it now expects economic growth to slow and inflation to fall below the bank’s target in the coming year. The loonie remained under pressure after data on Friday showed that the annual rate of inflation in Canada slowed to 1.5% in December from 2% in the previous month, pressured lower by the largest drop in gasoline prices in over five years.
On a month-over-month basis, consumer prices fell 0.7%, the largest decline since June 2011, while core inflation fell 0.3%.
Weekly bias remains strongly bullish as 21 and 55 Exponential Moving Averages are crossed upward on the 1 hour, 4 hours, Daily, Weekly and Monthly time-frames. MACD and SSRC oscillator indicator are also signalling more bullish momentum is expected to continue this week. Am expecting more rise to 1.3000 psychological zones.
Later this week investors will be watching closely the USD FOMC statement/Federal Funds Rate, USD Advance GDP q/q and CAD Gdp.