Technical Bias: Bullish
- USDCAD climbs 0.6% to 1.2232, advancing for a third consecutive day.
- US dollar index rallies more than 1 percent, reaching 95.39.
- BOC Governor Poloz says Canada’s economic outlook “uncertain” and that the impact of the oil price shock could take years to materialize.
The USDCAD advanced for a third consecutive day on Tuesday, as Bank of Canada Governor Stephen Poloz acknowledged it could take years before the Canadian economy adjusts to the oil price shock.
The USDCAD climbed to its highest level in a month, reaching an intraday high of 1.2251. It would subsequently consolidate at 1.2232, advancing 0.6 percent. The USDCAD is in the midst of a bullish breakout, having risen 1.8 percent since Monday. That’s the pair’s biggest rally in two months. The latest break out has pushed price action well north of the long-term moving averages (SMA100 and SMA200).
US Dollar Rallies
The US dollar index rallied across the board, advancing 1.2 percent to 95.39. The dollar index has gained more than 2 percent since Monday.
The dollar was supported on Tuesday after the Commerce Department said housing starts surged 20.2 percent in April to the highest level in nearly seven-and-a-half years. Building permits also posted a double-digit increase, government data showed.
Poloz Weighs In
Bank of Canada Governor Stephen Poloz said on Tuesday that the impact of the oil price shock has yet to materialize completely, acknowledging that it could take years for the full effect to make its way through the Canadian economy.
In a prepared speech in Charlottetown, PEI, Poloz characterized the economic outlook as “uncertain,” but did say a rebound would occur eventually.
“We’ve been on a voyage of rebuilding since the Great Recession,” Poloz said, adding, “Not only are the headwinds of the global financial crisis still blowing, but now we’re also dealing with lower prices for oil and other key commodities, which previously were a key growth engine for us.”
The halving of oil prices between June and January weighed on the Canadian economy, which relies heavily on energy exports. As a result, the BOC slashed interest rates to 0.75 percent from 1 percent to help cushion a bigger economic blow. Analysts continue to speculate whether the BOC may cut rates again this year. Poloz’s speech indicated that the BOC was comfortable holding rates steady for the time being, despite volatile inflation.
“It wouldn’t make sense to respond to every wiggle in the inflation rate,” he added.