The Bank of Canada has kept the interest rate at 5%.

The Canadian dollar has slightly weakened since last Monday after the Bank of Canada maintained the interest rate in October, in line with expectations. Furthermore, growth forecasts for 2023 and 2024 have been revised down due to global inflation concerns and ongoing tensions in the Middle East, which have added to concerns about rising oil prices, posing an additional risk that has pushed inflation rates higher once again.

The Bank of Canada (BoC) has kept the interest rate unchanged at 5% at the recent meeting, signaling that future interest rate decisions will depend on economic data. While keeping the rate constant this time, the BoC believes that past rate hikes have had a significant impact on the economy. Despite current inflation fluctuations, it is anticipated that inflation will decrease to below 2% by 2025.

Retail sales in Canada declined by 0.1% from the previous month, largely affected by labor strikes at the British Columbia port and transportation chain disruptions due to labor stoppages. Almost all product categories experienced a slight decrease in sales, particularly in oil, despite rising prices.

Producer prices in Canada increased by 0.4% compared to the previous month, exceeding expectations of 0.3%, with energy costs continuing to rise consistently. Petrochemicals increased by 3.7%, crude oil by 9.9%, and diesel by 7% due to reduced supply and export restrictions imposed by Russia.

Although rising oil prices and the depreciation of the Canadian dollar pose a risk of increased inflation, it is considered beneficial for Canada's exports, primarily energy. This will undoubtedly improve the trade balance due to increased exports.

The yield on Canadian 10-year government bonds increased once again to 4.1%, approaching the recent high of 4.27%. While the BoC has kept the interest rate steady, there is a possibility of future rate hikes. Furthermore, the yield on U.S. government bonds has also increased, driven by concerns that the Fed may raise interest rates due to increased inflation concerns.

Techical analysis data (5H)

Resistance: 1.3822, 1.3828, 1.3838

Support: 1.3805, 1.3796, 1.3789

Source: Investing.com