24.01.202013:07 Forex Analysis & Reviews: Canadian dollar could not keep balance

The current week has been saturated for the Canadian currency. Looney was under pressure due to many factors, the center of which was the meeting of the Bank of Canada at a key rate. Which analysts emphasized to have provoked a negative wave of decline in the "loonie".

Recall that on Wednesday, January 22, the regulator expectedly kept the key rate unchanged at 1.75%. According to analysts, after such a decision, the Canadian dollar staggered and moved down, losing about 0.5% of its value. In addition, the department allows further rate cuts in the event of a deterioration in the prospects for the Canadian economy.

In addition to the decision on the rate, the Bank of Canada worsened forecasts for GDP growth. According to Stephen Poloz, the head of the regulator, much will depend on the state of the economy. He previously stated that the country's economy is stable enough to keep rates unchanged, but now much has changed. The Bank of Canada will focus on current circumstances, including the situation in the global economy, in order to timely respond and lower rates. Recall that the regulator keeps them unchanged since October 2018, but this cannot last forever.

Currently, a number of prerequisites have appeared for a further reduction in rates. First of all, this is a very low level of inflation, not reaching the target mark of 2%. Another factor is the rather negative outlook for the country's economic growth. In the fourth quarter of 2019, the Bank of Canada worsened it to 0.3% compared to 1.3% expected in October.

There was also new information on the consumer price index last Thursday where according to which the December inflation in Canada remained at the same level of 2.2%. The reason for this was the rise in energy prices, analysts say. They also added that the current state of affairs negatively affected the dynamics of the Canadian currency.

The USD/CAD pair was trading near 1.3133 on Wednesday showing moderate growth. However, later on, the situation changed to not in favor of the "loonie". The currency of the Maple Leaf Country began to fall, becoming a downward trend for a long time.

On Friday, the tandem glide continued where it started the day at 1.3125 and attempted to get out of the low range.

On the latter days, these attempts were crowned with success as the USD/CAD pair reached its goal of rising to 1.3140. And experts concluded that this result exceeded the level of the environment. Now the pair is trying to enter an upward trend, and analysts are confident that the Canadian dollar will succeed.

According to experts, pressure on the "loonie" also contributed to the decline in oil prices. Recall that black gold is one of the key export items of the country. At the end of the week, massive oil sales were recorded, triggered by comments by the International Energy Agency (IEA) about the oversupply of the global market. The IEA also expressed serious concerns about the demand for hydrocarbons due to the spread of coronavirus in China.

Despite a number of current negative factors, the growth potential of the Canadian currency impresses experts and they reassure that in the near future the USD/CAD pair will again tune in to the rising wave. The main driving force of the Canadian dollar will be the dynamics of oil quotes, which currently demonstrate stability. This gives confidence to the "loonie" who intends to regain its lost ground.