Firstly, the interest rate cut aimed to manage inflation and support economic growth. Lower interest rates make borrowing cheaper for consumers and businesses, which can increase spending and investment. However, if the economy is not performing well, the Bank of Canada might lower rates to stimulate growth. In this context, the rate cut could help moderate inflation if it was too high or to prevent deflation if economic activity was slowing down.
Secondly, this rate cut had a direct impact on the Canadian Dollar. Lower interest rates often mean lower returns on investments denominated in that currency. As a result, investors might move their money to other currencies or assets offering better returns. This shift in investment can reduce demand for the CAD, leading to its depreciation. Thus, while the rate cut was designed to support economic stability. it also made the CAD less attractive to investors, causing it to weaken.
In a nutshell, the Bank of Canada’s rate cut was intended to help manage inflation and stimulate economic growth. However, by making the CAD less appealing to investors, it contributed to a weakening of the currency. So this confirm to us that the upcoming CAD CPI release is going to show slowdown of inflation and make cad to be weak thus, I expect to sell CAD
Stay tuned !
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