Bank of Canada - Interest Rate Statement strengthens the Canadian Dollar

This Thursday afternoon of March 8th 2012 at 14:00 GMT (9:00 EST) the Bank of Canada released there announcement on Interest Rates. All analysts surveyed expected no change from the Central Bank, however they do release a statement about why they decided not to change the rate this time.

These statements are watched by the market to see if they give any clues about the next move from the Bank of Canada. Sometimes they include revisions to the Central Banks forecasts on GDP and CPI inflation.

Anyhow as expected the BOC left rates unchanged at 1.00% however they did make some positive statements on growth, they also said that monetary policy was already low and there was lots of stimulus which sounded like "we are not going to be giving you anymore because you already have enough"...this is what a parent says to a little child when they ask for more candy. The markets want candy, which is cheap money dumped on them from Central Banks. ;)

Anyway here is a link to the statement.

The Canadian Dollar appreciated by about 40 pips, however in the heat of the moment it may have been difficult to catch it if you were still reading thru the statement. There must be algorithmic language processing programs that interpret the statement pretty quickly. Here the charts:

First is the 10 second chart of the USDCAD

This is the 10 second chart of the CADJPY

Canadian CPI - big lower deviation causes short spike and reversal

This morning at 12:00 GMT (7:00 EST) the Consumer Price Index was released out of Canada. This is the main inflation figures and were alot lower. Earlier in the week the Bank of Canada released their Interest Rate Decision along with a statement, and the next day there was a monetary policy report which did give some sense the Bank would be raising rates again at some point.

Here are the figures:
CAD Bank of Canada CPI Core MoM
Estimates- Median: -0.2% Average: -0.2% Range: -0.4% to +0.2%
Actual: -0.5% Prior: +0.1% No Revision

CAD Bank of Canada CPI Core YoY
Estimates- Median: +2.2% Average: +2.2% Range: +2.0% to +2.5%
Actual: +1.9% Prior: +2.1% No Revision

CAD Consumer Price Index MoM
Estimates- Median: -0.2% Average: -0.2% Range: -0.5% to +0.2%
Actual: -0.6% Prior: +0.1% No Revision

CAD Consumer Price Index YoY
Estimates- Median: +2.7% Average: +2.7% Range: +2.4% to +3.1%
Actual: +2.3% Prior: +2.9% No Revision

and here is a 10 second chart of the USDCAD, showing the spike from the news and then the reversal. CPI figures are a bit tough to trade in the current economic environment because interest rates are already lower, and the reason these figures traditionally have moved the currency is because they mean the Central Bank will adjust rates according to whether inflation is high or low...but this will not happen, although it does mean that Bank of Canada is less likely to raise rates again soon, which some had expected with the monetary report. USDCAD rallied from 1.0070 to 1.0150 from yesterday's new york session into today's CPI release, perhaps there was a leak, not surprising for Canadian Data. Anyway here is that chart:

and the 15 minute chart of the move heading into the release, also shows the 2 hours of whipsaw after the 12:00 GMT (07:00 EST) release, heading into the New York Cash Equity open at 14:30 GMT(9:30 EST):

Bank of Canada hold rates steady at 1% - USDCAD gets choppy whipsaw

No analysts expected a change in Interest Rates today at 9am EST (2pm GMT) from the Bank of Canada today. Last month there was a rumor that the Bank's Governor Carney would sound dovish and signal rate cuts in 2012, but he did not, thus last time the USDCAD did have a strong move down.

This time there were no such expectations, although there are a few who still expect a cut sometime in the 1st half of 2012 as Australia, norway and sweden cut last month. Canada figures have not been bad but Carney's comments mentioned the situation in Europe, so basically the Bank of Canada remains on hold. Perhaps the slight upward bias on USDCAD (Canadian Dollar weakness) could be attributed to his emphasis on the crisis in Europe

If you look at the Statement Here for Bank of Canada Rate Decision Statement for January 17th 2012

you will notice it really isn't that much different than the Rate Decision Statement for December 2011

What is different was they revised their GDP forecasts while keeping inflation forecasts the same. The last time they gave GDP forecasts were during their October 2011 Rate Decision Statement so although they forecast 2.1 for 2011 it came out at 2.4, so they raised GDP for 2012 from 1.9 to 2.0 but lowered GDP for 2013 from 2.9 to 2.8...so a mixed bag so to speak.

Anyhow here is a 10 second chart of the whipsaw on the USDCAD:

Of course the forex pair had moved down quite a bit overnight, so a bit of a retracement was due. The market was preoccupied with talk of S&P downgrading European Banks after their Downgrades of several European countries on Friday January 13th.