USD/CAD reduced earlier gains after Bank of Canada’s rate decision

US dollar pared its gains against the Canadian counterpart on Wednesday, following Bank of Canadas decision to keep the base interest rate on hold at its monthly meeting.

USD/CAD fell off session highs at 1.0431, recorded at 14:00 GMT, after which was trading at 1.0410 at 14:27 GMT, still up by 0.40% for the day. Support was likely to be received at current session low, 1.0354, while resistance was to be encountered at July 11th high, 1.0470.

On Wednesday, at its monthly meeting, Bank of Canada left its benchmark interest rate intact at 1.00% in line with expectations. According to the bank, this level was appropriate, given the current slow down in economic growth, low inflation rate and observed imbalances, regarding household spending. However, central bank officials expected a rise in borrowing costs during the coming months. If economic conditions in Canada tended to normalize, the monetary policy would be gradually normalized as well in order to maintain price stability with inflationary objective set at 2%.

Meanwhile, in his prepared testimony to the Financial Services Committee in Congress, Federal Reserve Chairman Ben Bernanke did not introduce any new directions, regarding monetary policy. He said that the scale of monetary stimulus was not on a “preset course” and depended on that how economy performed. Central bank’s bond purchasing program could be tapered at a faster pace, slower pace or even temporarily increased in accordance with economic situation in the country. The Chairman also stressed that an accommodative monetary policy will still be needed in the foreseeable future.

Earlier today an official report said that housing starts in the United States dropped by 9.9% during June, reaching an annual 0.836 million units, while building permits also decreased in number in June, falling by 7.5% to 0.911 million units.

Elsewhere, Canadian dollar was relatively steady against the euro, with EUR/CAD up by 0.08% to reach 1.3662.