FXstreet.com (Córdoba) - The Canadian Dollar plunged on Tuesday after the Bank of Canada decided to keep its overnight rate at 0.25%. USD/CAD soared to 1.0526 reaching a one-week high. From there the pair pulled down to 1.0475. Currently the pair trades at 1.0492/95, 2.09% above today's opening price. The pair is posting the biggest daily gains since June 3.
The Economic and Strategy Team of the National Bank of Canada affirms: We believe conditions are in place for the U.S. economy to improve faster than expected. This will lead to the stabilization of the labour market south of the border and a reassessment of the Fed's current zero policy stance. This should go a long way in relieving pressures on the Canadian dollar. In such an environment, the loonie will not end up being the drag the BoC is currently expecting. Our scenario suggests market will become sceptical of the BoC's conditional commitment in coming months.