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As inflation enters the target range, the Bank of Canada cuts interest rates, and the Canadian dollar weakens.
After the Bank of Canada cut interest rates, it is understandable that the Canadian dollar fell among most G7 currencies, with the most notable being the rise of the US dollar against the Canadian dollar after the data release. Following a surprising increase in the US services purchasing managers' index (PMI), the US dollar was boosted and further rose.
The Bank of Canada has fired the first shot of interest rate cuts! It may continue to cut in July! Short-term gains for USD/CAD have increased by over 50 points.
On June 5th, 2024, the Bank of Canada announced its first interest rate cut since 2020, lowering the benchmark interest rate by 25 basis points to 4.75%, a decision in line with market expectations. This move signifies that Canada has become the first central bank in the G7 to initiate an easing cycle of monetary policy, providing a new direction for global monetary policy.
There are sufficient reasons for the Bank of Canada to lower interest rates this week! The Canadian dollar is bearish, and hopes for a rebound are pinned on expectations of future interest rate cuts cooling down.
On June 5th at 21:45 Beijing time, the Bank of Canada will hold a rate decision. Currently, the market is roughly split on whether the central bank will take action now or wait until July. Howard Du, G10 Forex strategist at Bank of America, said, 'Ahead of the June Bank of Canada meeting, we maintain a bearish CAD stance.'
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