USD/CAD erases BoC-inspired gains, trades near 1.4050
- Bank of Canada lowered its policy rate by 50 basis points to 0.25%.
- US Dollar Index looks to end week below 99 handle.
- USD/CAD remains on track to snap four-week winning streak.
The USD/CAD pair rose to a daily high of 1.4153 following the Bank of Canada's (BoC) surprise rate cut announcement in the early trading hours of the American session. However, with the USD selloff picking up steam in the last hours, the USD/CAD pair erased the majority of its daily gains and was last seen trading at 1.4040, adding 0.15% on the day.
BoC cuts policy rate for third time in March
The BoC lowered its policy rate by 50 basis points to 0.25% on Friday. "The rate cut is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic," the BoC explained in a statement.
While responding to questions from the press, Governor Poloz reiterated that the Governing Council stands ready to take further actions as required but noted that the current rate was the lower-bound.
Regarding the details of the BoC's policy measures, “the BoC announced it is officially joining the QE club, as it will purchase at least $5 bln per week in Government of Canada bonds, that equates to about 1% of GDP per month," noted Benjamin Reitzes from BMO Economics. "Furthermore, the Bank is launching a Commercial Paper Purchase Program (CPPP) to support short-term funding markets.”
On the other hand, the US Dollar Index extended its slide and broke below the 99 handle to cause the pair to pull away from its highs. As of writing, the DXY was down 0.65% on the day and was looking to close the week nearly 3% lower.
The data from the US on Friday showed that the University of Michigan Consumer Sentiment Index dropped to 89.1 in March's final reading from 101 in February to reflect the negative impact of the coronavirus outbreak on consumer confidence.
Technical levels to watch for