The Canadian dollar dropped to its lowest level since January 4, falling 0.7 per cent to $1.3439 versus the U.S. dollar and reducing its climb for 2019 to 1.5 per cent.
The fall comes after the Bank of Canada abandoned its position that interest rates would need to rise as economic growth cooled. The BoC left its benchmark rate at 1.75 per cent midweek, citing “increased uncertainty about the timing of future rate increases,” reports Bloomberg News. The market has now virtually ruled out a rate hike this year and in fact expectation is growing that the rate will be cut by mid-year, based on Bloomberg data.
“They sound less convinced about the next hike,” said Win Thin, global head of currency strategy at Brown Brothers Harriman, as reported by the Ottawa Citizen. “If the data continues to come in weak, they may have to switch to a neutral bias. The data has added to the gloom.”
The BoC’s reversal on a rate hike came as the economy slowed almost to a halt in the fourth quarter.