This morning, Bank of Canada announced that it will keep its overnight lending rate at a record low of 0.25%. However, they are also hinting that they may not keep the benchmark rate constant until July, as promised earlier this year. Bank of Canada stated that Canadian economy is recovering faster than expected. They are currently looking into increasing benchmark rate as early as June.
Moments before the announcement from Bank of Canada, loonie was trading at 98.63 cents with the US dollar. Within 5 minutes after the announcement, Canadian dollar were up 1.3 cents to 99.93 cents per 1 US dollar. Currently Canadian dollar is trading above par, at 1 CAD = 1.0016 USD.
Bank of Canada raised its economic growth outlook to 3.7%, stating that it is already above expectations.
Loonie was flirting with greenback for more than three weeks while taking the biggest daily loss on last Friday, due to the fraud charges laid on Goldman Sachs from Securities and Exchange Commission (SEC). Loonie were lowered to around 98.5 cents per 1 US dollar.
I believe that this would be the best opportunity for the Canadian dollar to build grounds above and beyond parity. However, if net export numbers are decreased due to a high exchange rate, loonie would eventually need to fall back down.
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