USD/CAD: Loonie Trims Back BoC-Induced Gains

Canada’s dollar let go of some of the BoC-triggered gains after the central bank announced it was keeping its overnight rate at 0.5%.

Ottawa - The USD/CAD pair was down 0.28% and trading at C$1.3091, after hitting an intraday low of C$1.3055 — a level last seen on May 20. The biggest event of the session was when the Bank of Canada (BoC) decided to keep its key overnight rate unchanged at 0.5%. The BoC also stressed that Canada's economic adjustment to the oil price shock has been uneven, adding that Alberta's wildfires will shave about one and a quarter percentage points off real GDP growth in Q2. The market region was supportive of the loonie, but was fairly limited since the BoC statement was not followed up by the bank's Governor Stephen Poloz's appearance. "The Canadian dollar traded up only slightly since the decision, and very much in line with other commodity-linked currencies. The statement did provide a bit more clarity on the Bank's assessment of the impact of the wildfires. But, overall there was little in it to alter our view that it will be some time before we see any movement in the policy interest rate," said Leslie Preston, senior economist at TD Economics. Meanwhile, oil prices were higher on Wednesday, also boosting the commodity-based loonie. The WTI futures rose 0.80% to $49.01 per barrel, while Brent contracts increased 1.21% to $49.20 per barrel. In the US, traders digested house prices rising 0.7% in March, beating the forecast of 0.5%, after the 0.4% hike booked a month before. Meanwhile, the US Census Bureau posted the international trade in goods for April, reaching a deficit of $57.53 billion, after the previous gap of $56.90 billion booked in March, beating the survey of a bigger drop to $60.0 billion. Also, Philadelphia Federal Reserve (Fed) President Patrick Harker spoke at the economic forum in the morning. Neel Kashkari from the Minneapolis Fed spoke about the energy sector and monetary policy on Wednesday and Robert Kaplan from the Dallas Fed is scheduled to deliver a speech later in the session.