Canada reduces interest rate by 50 basis points to 1.00%. Loonie mixed in Forex Trading. | CountingPips Forex Blog

January 20, 2009 - Forex Economic News

Canada reduces interest rate by 50 basis points to 1.00%. Loonie mixed in Forex Trading.

The Bank of Canada reduced its interest rate by 50 basis points to 1.00 percent today according to a government release. The rate cut comes after the Bank lowered their interest rate by 75 basis points in December and by a total of 350 basis points since December of 2007. Today's reduction takes the rate to its lowest standing since the beginning of the Bank of Canada in the 1930's. The rate reduction matched market forecasts expecting the 50 basis point cut.

The report commented that, "The outlook for the global economy has deteriorated since the Bank's December interest rate announcement, with the intensifying financial crisis spilling over Loonie mixed in Forex Trading into real economic activity. Heightened uncertainty is undermining business and household confidence worldwide and further eroding domestic demand. Major advanced economies, including Canada's, are now in recession and emerging-market economies are increasingly affected."

The BOC cited falling exports, domestic demand, consumer confidence and economic growth as the major factors specifically effecting Canada's economy. The bank is forecasting that the Canadian economy will decline by 1.2 percent in 2009 before turning around and expanding by 3.8 percent in 2010.

The BOC left open the possibility of further rate cuts as it said in the report that the "Bank will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the 2 per cent inflation target over the medium term." Canada's November consumer price index registered an annual increase of 2.0 percent and December's cpi is scheduled to be released on Friday at 12:00 GMT.

The next rate decision for the Bank of Canada is coming on March 3rd.

Canadian Loonie mixed in Forex Trading.

The Canadian loonie dollar has been mixed today in the forex market after today's interest rate reduction. The loonie has been stronger against the Australian dollar, New Zealand dollar, euro and pound while falling versus the US dollar and Japanese yen.

The U.S. dollar has advanced against the Canadian loonie as the USD/CAD pair trades at the 1.2656 level in the U.S. afternoon after opening the day at 1.2592. Against the Japanese yen, the loonie is declining for the second day in a row as the CAD/JPY trades at 70.98 after opening at 71.56.

The euro has lost ground against the loonie as the EUR/CAD trades at the 1.6333 level after opening the day at 1.6365. The British pound has also fallen versus the loonie as the GBP/CAD has fallen to the 1.7632 level after opening at 1.7874. The Australian dollar has declined against the loonie as the AUD/CAD pair trades at 0.8228 from today's opening rate of 0.8311 while the New Zealand dollar has also declined as the NZD/CAD trades at 0.6606 from 0.6692 earlier today.

USD/CAD Chart - The US Dollar gaining today against the Canadian Loonie and trading above the 21 period simple moving average. (Hourly Chart).

Today's Forex Chart

tags: interest rate, CAD, Canada, Forex Trading

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