USD/CAD recovers to 1.2500 following BoC's policy announcements

The USD/CAD pair dropped to a daily low of 1.2434 with the initial reaction to the Bank of Canada's (BoC) monetary policy announcements but didn't have a difficult staging a recovery. As of writing, the pair was down 0.1% on a daily basis at 1.2496.

BoC tapers QE, CAD fails to capitalize

In a widely expected decision, the BoC left its policy rate unchanged at 0.25% after its July meeting and reduced the target of weekly net asset purchases of the government of Canada bonds to C$2 billion from C$3 billion. Despite this hawkish step, the BoC adopted a relatively cautious tone in its policy statement and hurt the CAD.

"Recent spread of new COVID-19 variants is a growing concern, especially for regions where vaccinations rates remain low," the policy statement read. Additionally, the bank lowered its 2021 GDP growth forecast to 6% from 6.5% in April.

At 1515 GMT, BoC Governor Ticc Macklem will be delivering his remarks on the policy outlook in a press conference.

On the other hand, the broad-based USD weakness is forcing USD/CAD to stay in the negative territory. Earlier in the session, the US Federal Reserve published FOMC Chairman Jerome Powell's prepared remarks for delivery at a two-day congressional hearing that will start on Wednesday at 1600 GMT. 

Powell is set to note that the job market is still a ways off from the progress needed to begin the bond-buying taper. Furthermore, the chairman will reiterate that the monetary policy will continue to deliver powerful support until the economic recovery is complete. Currently, the US Dollar Index is down 0.36% on the day at 92.43.

Technical levels to watch for