Canadian Dollar falls back into seven-month lows as growth risks weigh on BoC

• The Canadian Dollar is falling back for the second day in a row as markets shy away from risk.
• BoC sees a period of negative growth over the horizon.
• Despite a weakening economy, BoC is hampered on policy by increasing inflation risks.
• USD/CAD reaches seven-month high on Wednesday.

The Canadian Dollar (CAD) is down once again on Wednesday, adding to yesterday’s declines and sending the USD/CAD back into the 1.2800 handle as the Bank of Canada (BoC) holds rates steady as markets broadly expected.

The Bank of Canada (BoC) held its main reference rate at 5.0% Wednesday morning like Wall Street broadly predicted, but dovish comments from BoC Governor Tiff Macklem are failing to spark much confidence in the Loonie. 

The BoC is expecting “two or three quarters” of negative growth as a recession looms over the Canadian economy, with Governor Macklem specifically noting that odds of achieving a soft landing are beginning to decrease.

Broad-market risk aversion is the name of the game as Tuesday’s risk-off flows continue for a second day, sending the US Dollar (USD) higher. Crude Oil prices, however, are finding a floor for Wednesday, helping to limit losses for the oil-backed CAD.

https://www.fxstreet.com/news/canadian-dollar-backslides-again-as-dovish-boc-holds-rates-flat-expecting-negative-growth-202310251651