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CAD Surges as BoC Tapers Turns Hawkish; ECB Meeting

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Rates as of 0500 GMT

Market Recap

CAD was center stage overnight, with a press disaster around the Bank of Canada meeting capturing everyones attention. According to the website Zero Hedge

About 9 minutes before the 10am press release, Bloomberg blasted what appears was a fat fingered and false MT Newswires headline which said Bank of Canada Maintains Its QE Purchases, which was a shock to consensus expectations that the BOC would taper its QE by C1BN not because it wants to but because it has to

the Loonie tumbled in kneejerk reaction as it meant that the BOC would keep conditions overly dovish even if it meant the bond market would risk running out of bonds soon.

All of that changed, however, the moment the actual BOC statement hit, which revealed that as expected the BOC would indeed taper QE by C1BN from C4BN to C3BN

Oddly enough, the offending headlines have been removed from Bloomberg.

You can see the confusion in the market how USDCAD rose sharply when the MT News headline ran, then plunged a few minutes later when the real news came through.

The reason given for cutting bond purchases was significant. The market had expected them to taper because the Bank owns an everincreasing percentage of the Canadian bond market 42, thereby impairing the markets efficiency, but the Bank made no mention of this fact. Rather, it said the move reflects the progress made in the economic recovery. Furthermore, they did not adjust the duration of their bond purchases. The…

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