USD/CAD drops on the Bank of Canada statement
The Bank of Canada acknowledgement that economic data has been "encouraging" with "robust" consumer spending and housing measures along with an "improving" labour market sent the Canadian dollar broadly higher.
The BOC has been consistently cautious this year, warning that strong economic data was an aberration but the stream of good news appears to have finally convinced policymakers, or at least led to some cautious optimism.
"Very strong growth in the first quarter will be followed by some moderation in the second quarter," the statement said.
That only 'some' moderation will follow a strong quarter is a shift from the prior stance where they said improvements were temporary.
To close out the statement, the text said the current stance was 'still' appropriate, which is a gentle way of saying that it might not be appropriate for long and that a shift to a more-hawkish stance could be coming.
The shifts sound subtle but the market was listening. The loonie hit a one-month high on the statement with USD/CAD falling 80 pips to 1.3447 from 1.3525 before the headlines crossed.
