USD/CAD jumps after Bank of Canada preaches caution on interest rates

Technical Analysis

Author: Adam Button | usdcad

Canadian dollar drops on the headlines

The market feared a hawkish shift from the Bank of Canada after last week's strong jobs report but it didn't come.

Instead, the Bank of Canada said "the current stance of monetary policy remains appropriate" but that policymakers will "continue to be cautious" as they assess how the economy has coped with recent rate hikes.

USD/CAD was trading at 1.2660 before the announcement and jumped to 1.2750 afterwards.

The pair is now eating into the drop that came after the huge jump in November employment reported last Friday.

Another part of the gain is the general caution from the BOC. The market is trying to find out how likely they are to raise rates more than once or twice next year. The sudden shift to caution suggests Poloz is more reluctant than many thought six weeks ago.