GFX Currency Alert-Bank of Canada

Good Morning,

Today as expected the Bank of Canada announced that they would keep their key interest rate at 0.75%. In their accompanying statement the Bank made the following observations;

-Total CPI Inflation has fallen as expected and inflation risks are more balanced

-Core inflation remains near the Bank’s target level of 2%

-Global economy is evolving broadly in line with expectations

-oil price shock has had a limited effect on the 4^th quarter growth, biggest effect will be in the first quarter of 2105

-Financial conditions in Canada had eased materially including the Canadian Dollar, weak dollar will mitigate the oil price shock

This is a positive statement as the Bank does not give any indication that future rate cuts are needed but given their lack of guidance going forward this does not surprise me. I am concerned about the comment that the full impact of the oil price will be felt in the first quarter, for this reason I think another rate cut is still on the table.

As you would expect from this announcement USD.CAD has dropped about 70 points. At the same time the Loonie is showing real strength against the Euro and Sterling, we have not seen rates this good for currency buyers in a long time.

The next Bank of Canada interest rate announcement will be April 15^th where they will also release their Monetary Policy Report

Mike