The Bank of Canada, since backing away from day-to-day management of the exchange rate in the early 2000s, has almost never intervened. That makes Governor Carney’s comment that “FX intervention is always an option”, somewhat surprising.

Given the fact that the BOC just laid out the case for a strong CAD in its MPR, (strong commodities, weak USD) it is very doubtful they would spend a nickle to try and weaken the Loonie, however. The threat is very hollow indeed. The market is not buying it either: USD/CAD is at 1.0490 from 1.05 before the comment.

UPDATE; Carney declines to characterize himself as “comfortable” with the strong CAD. He says he sees CAD strength as a “major downside risk”. The Bank has a target for inflation, but not the CAD.

Earlier Carney said the BOC will use every available tool to meet its inflation target. It is attacking the target from below, so the CAD strength is dampening inflation…Maybe they could intervene someday after all…CPI was last at 0.9%, well below the BOC’s 2% target…