Canadian Dollar Appreciates Amid Policy Divergence Between Fed, BoC
The Canadian dollar spiked higher against its major counterparts
in the European session on Friday, due to the monetary policy
divergence between the Federal Reserve and the Bank of Canada.
The Bank of Canada recently announced decision to taper its QE
program from C$4 billion to C$3 billion a week.
The central bank now expects inflation to return to 2 percent on
a sustained basis some time in the second half of 2022.
That implies the BoC could raise its overnight rate earlier than
The Fed said that it will maintain ultra-easy policy until
"substantial further progress" towards its employment and price
stability goals are attained.
Data from Statistics Canada showed that Canada's economy grew
0.4 percent in February, after a rise of 0.7 percent in the
Economists had expected an increase of 0.5 percent.
The loonie rose to 1.4820 against the euro, its biggest level
since April 6. The loonie is likely to find resistance around the
Data from Destatis showed that German economy contracted more
than expected in the first quarter due to the coronavirus
The gross domestic product fell 1.7 percent sequentially, in
contrast to the 0.5 percent growth seen in the fourth quarter of
2020. This was bigger than the economists' forecast of -1.5
The loonie reached as high as 88.82 against the yen, up from
Thursday's close of 88.66. If the loonie extends rise, 0.90 is
possibly seen as its next resistance level.
Data from the Ministry of Economy, Trade and Industry showed
that Japan industrial output climbed a seasonally adjusted 2.2
percent on month in March.
That exceeded expectations for a decline of 2.0 percent
following the 1.3 percent decline in February.
The loonie jumped to 0.9555 against the aussie, setting a fresh
4-week high. On the upside, 0.92 is possibly seen as the next
resistance level for the loonie.
The loonie, however, dropped to 1.2277 against the greenback as
the latter firmed on upbeat economic data. This followed a high of
1.2266 logged at 8:15 am ET, which was its highest level since
February 2018. The next likely support for the loonie is seen
around the 1.25 level.
Data from the Commerce Department showed that U.S. personal
income skyrocketed in the month of March.
The personal income soared by 21.1 percent in March after
plunging by a revised 7.0 percent in February.