USD/CAD collapses on BoC’s Wilkins comments

The Canadian dollar jumped across the board after Carolyn Wilkins, Senior Deputy Governor at the Bank of Canada, mentioned that the central bank will assess whether all the stimulus in place is still needed. It could be a hint that a rate hike could be a possibility and triggered a dramatic rally of the loonie. 

Price action across financial market remain quiet excluding all CAD crosses. After the statement from Wilkins, USD/CAD fell more than a hundred pips. The pair dropped from 1.3465 to 1.3345, hitting the lowest level since April 18. 

It remains near the lows, with a strong bearish momentum. The rally pushed the price below the 1.3425 key support area and also under May’s low. If the slide continues the next support levels to watch might be 1.3305/10 (Apr 11 low) and 1.3275 (Mar 16 & 30 low). On the upside, the US dollar needs to rise back above 1.3390 to remove some of the negative momentum. 

A rate hike in the cards?

The statement from Wilkins could represent a shift to a hawkish stance from the Bank of Canada. She mentioned that they “will assess if all the stimulus in place is still needed as economy growth continues and, ideally, broadens further”. She sounded upbeat on the economy and mentioned exports as the “one disappointment” in Q1. 

Regarding the US, Wilkins sounded with caution and affirmed that the lack of clarity of their policies will add uncertainty to BoC economic projections.