The Bank of Canada held rates at 0.25%, matching expectations and its conditional commitment to keep rates at that level until the second half of 2010. The statement struck a neutral tone, saying that while there are still significant headwinds remaining, â€śglobal economic developments have been slightly more positive and the global outlook has improved modestlyâ€ť relative to its October forecasts. The bank also softened its language regarding the impact of the stronger Canadian Dollar. In its October meeting, the bank said that the current strength of the Canadian Dollar could more than fully offset the favorable developments in the economy. In todayâ€™s statement, the bank said that the persistent strength of the Canadian Dollar could act as a significant drag on growth and put additional downward pressure on inflation.
Todayâ€™s trading has been characterized by greenback strength, and that was no different in the USD/CAD pair which rose more than 100 pips from its support prior to the release near the 1.0485 level to a high in mid-NY trading at 1.0615. That level came close to testing a downward sloping line of resistance.