Bank of Canada rate drop: Here’s what that means for the loonie [Video]

The Bank of Canada lowered its key interest rate for the second time this year to 4.5 per cent. Here’s what the decision means for the Canadian dollar.

How has the decision affected the Canada-U.S. dollar exchange rate? 

The loonie didn’t react much to the Bank of Canada decision because the move was already priced in, said Rishi Sondhi, senior economist at TD Bank Group.

The Canadian dollar did dip briefly from around 72.55 to 72.44 soon after the rate decision was released, with more dovish wording than some were expecting from the central bank, but it recovered after the press conference to around 72.52, according to XE.com.

How much risk is there to the Canadian dollar?

The Bank of Canada has reduced rates twice now while the U.S. Fed has yet to lower rates. Divergence between the two central banks’ rate policy could put pressure on the Canadian dollar. 

The loonie didn’t move down on Wednesday, but is down about a cent over the past month as …