The Bank of Canada (BOC) in the New York session yesterday lowered interest rates by 25 basis points to 2.50%, a 3-year low and thus the first cut in six months.
BOC Governor Tiff Macklem explained that the decision was made because the risk of an economic slowdown is increasing with the weakening job market, exports affected by US tariffs, and inflation subsiding.
He stressed that the central bank is ready to make additional cuts if economic data shows that the situation continues to deteriorate.
After the announcement, the Canadian currency weakened by around 0.2% as the market assessed the prospects for looser monetary policy and the dovish tone translated from Governor Macklem's speech.
The Canadian bond market also saw investors increase expectations that more rate cuts could occur before the end of the year, reflecting concerns about the direction of the country's economic growth.
Meanwhile, for today's focus (Thursday) after the FOMC meeting concludes, investors will also focus on the outcome of the Bank of England (BOE) policy meeting.
With interest rates expected to remain at 4.00%, investors will be looking to see the central bank's views following the UK inflation data released yesterday.
On Friday, the Bank of Japan (BOJ) will announce its latest interest rate decision with the central bank's follow-up statement being watched for further indications of the direction of monetary policy.
