The Bank of Canada slashed the overnight interest rate to 0.25% from 0.75%. The decision was unscheduled. The BoC said the decision was necessary because: “The spread of COVID-19 is having serious consequences for Canadians and for the economy, as is the abrupt decline in world oil prices.”
In addition, the BoC launched a quantitative easing program to “address strains in the government of Canada debt market.” They will start buying Canadian government securities, across the yield curve, to the tune of $5 0 billion per week. Short term-funding strains will be alleviated by the new Commercial Paper Purchase Program (CPPP).
USDCAD rallied following the news. However, the BoC actions are occurring in concert with similar moves by the G-7 central banks which suggests the impact on USDCAD will be minimal, as the Loonie’s currency peers are in the same boat.
Chart: USDCAD 5 minute chart-2 days