The Canadian Dollar was weakened against its US relation after the Canadian Central Bank decided to not raise interest rates and hinted that it was not planning to in the near future.
The ‘Loonie’ fell against most of its major peers as Bank of Canada and soon to be Bank of England governor Mark Carney softened his language about a tighter policy for the second meeting in a row. He said that inflation will remain low for the near term as the Canadian economy has ‘material excess capacity’. The bank opted to leave the rate at 1% despite the nation’s Gross Domestic Product and consumer prices rising at lower than expected levels. Economists are predicting that there will be no rate hike in 2013 but 2014 looks more likely.
‘There is still the slightest bias toward higher rates, but it’s a microscopic bias,’’ Adam Button, currency analyst at a Montreal based FX company. ‘‘There is no reason to expect a rate hike this year. A rate hike in 2013 is extraordinarily unlikely.’’
The Canadian Dollar was also weighed down by a worse than expected Ivey Purchasing Manager Index. The PMI expanded at a slower rate than expected in February falling to 51.1, down from the 58.9 reading recorded in January. A figure above 50 indicates expansion, below indicates contraction.
The data adds to concerns that the nation’s economy is slowing down, GDP grew at 0.6%, its lowest level of growth since 2011.
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