The Canadian dollar was little changed against its U.S. counterpart on Wednesday, paring gains as the Bank of Canada stayed on course to reduce stimulus further over the coming months and as upcoming U.S. inflation data drew attention.
The Bank of Canada left unchanged its key interest rate at a record low 0.25% and said it would maintain the pace of quantitative easing, saying the economy would “rebound strongly” as vaccinations against COVID-19 picked up.
“A further taper in QE is likely in July as the growth outlook improves further and becomes more certain,” said Ryan Brecht, a senior economist at Action Economics.
In April, the BoC became the first major central bank to cut back on pandemic-era money-printing stimulus programs.
The U.S. dollar rose against a basket of major currencies as investors focused on a European Central Bank meeting and the U.S. consumer price index report, both due on Thursday, to gauge the current pace of the economic recovery.
The Canadian dollar was trading nearly unchanged at 1.2113 to the greenback, or 82.56 U.S. cents, having traded in a range of 1.2058 to 1.2118. Last week, it touched its strongest level in six years at 1.2007, bolstered by soaring commodity prices.
The price of oil, one of Canada’s major exports, slipped on Wednesday after U.S. inventory data showed a surge in gasoline inventories. U.S. crude prices settled 0.1% lower at $69.96 a barrel.
Canada took a cautious first step toward easing COVID-19 border restrictions, saying it was prepared to relax quarantine protocols for fully vaccinated citizens returning home starting in early July.
Canadian government bond yields were lower across a flatter curve, tracking the move in U.S. Treasuries. The 10-year fell as much as 5 basis points to 1.403%, its lowest level since March 11.
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