Canadian Dollar whipsaws as tariff concerns prompt BoC policy planning shift

• The Canadian Dollar fell and then rose 0.6% on Thursday.
• The BoC has announced changes to how it approaches policy guidance.
• Ongoing concerns about the US's lopsided trade approach has policymakers on edge.

The Canadian Dollar (CAD) whipsawed on Thursday, rising and then falling six-tenths of a percent as Loonie traders digest new policy guidance plans from the Bank of Canada (BoC). The shift in approach was announced by BoC Governor Tiff Macklem, who was speaking at the Calgary Economic Development meeting in Calgary, noted that the US's hamhanded dealings in on-again, off-again trade tariffs has prompted the Canadian central bank to take a looser, faster approach to dealing in rates with less forecasting to avoid inaccuracies in its track record.

The BoC recently trimmed interest rates for a seventh consecutive call, slashing rates even as the Canadian economy heads into another inflation upturn. The string of inflationary data continued on Thursday, with Canadian Industrial Product Prices and the Raw Material Price Index both accelerating more than expected in February.

Daily digest market movers: CAD plunges and rallies as BoC announces policy changes

• BoC Governor Tiff Macklem announced the Bank of Canada would be shifting its rate-call approach, reducing its forecasts in order to maintain accuracy.
• The stance shift from the BoC is meant to enable the Canadian central bank to react immediately to shocks in Canadian data as fallout from US tariffs weigh on the economy.
• Despite clear and obvious concerns warranting an immediate structural shift from the BoC, Governor Macklem insisted there's no obvious signs of problems in Canadian data.
• Canadian Industrial Product Prices rose 0.4% MoM in February, slightly above the expected 0.3%. January's hot print was revised slightly lower to 1.4%.
• The Canadian Raw Material Price Index also accelerated in February, rising another 0.3% MoM compared to the expected -0.3% contraction. January's raw index was also revised slightly lower, to a still eye-watering 3.5%.

Canadian Dollar price forecast

Thursday's whipsaw leaves the Canadian Dollar still stuck in familiar territory as the USD/CAD pair continues to churn near the 1.4300 handle. The pair briefly tapped the 1.4400 level in the early hours, before facing a downside rejection amid renewed Loonie bidding.

USD/CAD is still trading well within its ongoing sideways channel as price action grinds laterally. However, Loonie bulls will be looking to drag the pair into fresh lows at March's bottom bids near 1.4240.

USD/CAD daily chart