Canadian dollar falls after the Bank of Canada signals a move to the sidelines

The Canadian dollar declined after the Bank of Canada hiked rates, as expected, but also signaled a shift to the sidelines.

"If economic developments evolve broadly in line with the MPR outlook, Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases," the BOC statement said.

That comment boosted USD/CAD to 1.3407 from 1.3350 before the decision. It was part of a broad softening in the Canadian dollar.

The Bank of Canada Bank of Canada The Bank of Canada (BOC) is the central bank of Canada. It was created in 1934 and is responsible for implementing monetary policy in the country, issuing currency, and promoting a safe and stable financial system.The Bank's main role is to "promote the economic and financial welfare of Canada," as defined in the Bank of Canada Act. This includes maintaining the stability of the financial system, promoting a sound and efficient financial system, and fostering monetary conditions that will preser The Bank of Canada (BOC) is the central bank of Canada. It was created in 1934 and is responsible for implementing monetary policy in the country, issuing currency, and promoting a safe and stable financial system.The Bank's main role is to "promote the economic and financial welfare of Canada," as defined in the Bank of Canada Act. This includes maintaining the stability of the financial system, promoting a sound and efficient financial system, and fostering monetary conditions that will preser Read this Term decision also reverberated beyond Canadian markets with a broad bid in global fixed income emerging after the announcement, likely on the idea that other central banks will also pause the rate hiking cycle or pause sooner than previously anticipated.

For Canada, a pause elsewhere could ultimately be bullish if it helps lead to a soft landing Soft landing A "soft landing" in the economy refers to a situation where economic growth slows down, but does not fall into a recession. This is often the desired outcome for policymakers, as it allows them to make adjustments to the economy without causing widespread job losses or other negative effects associated with recessions.An example of a soft landing in the economy occurred in the United States between the years of 2004 and 2006. During this time, the Federal Reserve raised interest rates to cool do A "soft landing" in the economy refers to a situation where economic growth slows down, but does not fall into a recession. This is often the desired outcome for policymakers, as it allows them to make adjustments to the economy without causing widespread job losses or other negative effects associated with recessions.An example of a soft landing in the economy occurred in the United States between the years of 2004 and 2006. During this time, the Federal Reserve raised interest rates to cool do Read this Term and sets up better global growth in 2024 and beyond.