On Wednesday’s Bank of Canada policy meeting was a much-excepted event. The interest rates of BoC was unchanged at 0.25%. The statement noted the uncertainty on how the recovery would unfold from the corona virus impacted economy but positive notes were added that the impact of COVID-19 on the economy had peaked.

There will be a further decline in the level of real GDP (Gross Domestic Product) in the second quarter for 10-20 percent as continued shutdowns and lower investment in the energy sector made an impact on output. The Boc meeting was lead by Governer Mr.Stephen Poloz’s  and His replacement, Tiff Macklem also attended the meeting but according to the BoC statement “He participated as an observer in Governing Council’s deliberations for this policy interest rate decision and endorses the rate decision and measures announced in this press release.”

In Canada, the pandemic has led to historic losses in output and jobs. Still, the 2.66 million increase in job losses was well below the forecast of a loss of 9.0 million jobs. The Canadian economy appears to have avoided the most severe scenario presented in the Bank’s April Monetary Policy Report (MPR). Decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown on disposable income and helping to lay the foundation for economic recovery. While the outlook for the second half of 2020 and beyond remains heavily clouded, the Bank expects the economy to resume growth in the third quarter.

CPI inflation has decreased to near zero, as anticipated in the April MPR, mainly due to lower prices for gasoline. The Bank expects temporary factors to keep CPI inflation below the target band in the near term. The Bank’s core measures of inflation have drifted down, although by much less than the CPI, and are now between 1.6 and 2 percent.

According to the statement “ As market function improves and containment restrictions ease, the Bank’s focus will shift to supporting the resumption of growth in output and employment. It will maintain its commitment to continue large-scale asset purchases until the economic recovery is well underway. Any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.”

USD/CAD 4 Hours Chart:

Support: 1.3463 (S1), 1.3428 (S2), 1.3390 (S3).

Resistance:  1.3536 (R1), 1.3574 (R2), 1.3609 (R3).

BoC statement shows its efforts towards the economic recovery which appeals to the investors. We expect a bearish trend for USD/CAD.