Canada’s central bank surprises with rate cut, sending Looney higher

The Canadian central bank unexpectedly cut its main policy rate on Wednesday, possibly egged on by Tuesday’s agreement between Iran and the P5+1 nations on the latter’s atomic programme.

As of 15:15 the’ Loonie’, as traders call the currency cross between the Canadian dollar and the US dollar, was spiking higher by 1.35% to 1.29084.

“The Iran deal has been the catalyst for the Canadian dollar weakness versus the US dollar. USDCAD hit 1.28 for the first time since March 18. The market requires lower rates from the bank of Canada in anticipation of further debasement in the oil market.

“The Iran deal increases the probability of a 25 basis point cut in July 15 MPC meeting. It is just a matter of time before the USDCAD hits the 1.30 for the first time in more than six years,” Ipek Ozkardeskaya, analyst at London Capital Group, said on 14 July in a research note e-mailed to clients.