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Bank of Canada Policy Statement - USD/CAD Reacts with Bullish Breakout

The Bank of Canada held the overnight rate at 1.00%, the bank rate at 1.25% and the deposit rate at 0.75%.

The official statement noted a faster inflation growth than anticipated.

"Total CPI inflation has moved up to around the 2 per cent target, sooner than anticipated in the Bank’s April Monetary Policy Report (MPR), largely due to the temporary effects of higher energy prices and exchange rate pass-through. Core inflation remains significantly below 2 per cent although it has drifted up slightly, partly owing to past exchange rate movements...

Weighing recent higher inflation readings against slightly increased risks to economic growth leaves the downside risks to the inflation outlook as important as before. At the same time, the risks associated with household imbalances remain elevated. The Bank judges that the balance of risks remains within the zone for which the current stance of monetary policy is appropriate and therefore has decided to maintain the target for the overnight rate at 1 per cent. The timing and direction of the next change to the policy rate will depend on how new information influences the balance of risks

(source: BoC Statement)

The inflation concern does seem slightly hawkish putting some pressure to raise rates, but the economic conditions do not allow it.

USD/CAD reaction:

(USDCAD 4H chart, 6/4)

USD/CAD cracked a consolidation resistance, but key resistance lies at 1.10. The inflation concern suggests the current rally might not have enough fuel, and would likely find resistance at 1.10 if price does rally higher from the current "double bottom" seen in the 1H chart.