USD/CAD falls sharply to daily lows near 1.2500 after BoC policy announcements

• USD/CAD came under strong bearish pressure in the American session.
• BoC decided to lower weekly asset purchases to C$3 billion.
• BoC sees first rate hike coming in second half of 2022.

After rising to a session high of 1.2653 in the early American session, the USD/CAD pair came under strong bearish pressure and lost more than 100 pips. As of writing, the pair was down 0.7% on a daily basis at 1.2519.

BoC's policy statement boosts CAD

As expected the Bank of Canada (BoC) left its policy rate unchanged at 0.25% after the April policy meeting. Additionally, the BoC announced that it will lower its weekly purchases of Canadian government bonds to C$3 billion from C$4 billion.

In its policy statement, the bank noted that the current projections point to a rate hike in the second half of 2022. The BoC's hawkish outlook provided a boost to the CAD and weighed heavily on USD/CAD.

On the other hand, the US Dollar Index (DXY) erased a portion of its earlier gains, suggesting that the greenback is having a tough time outperforming its major rivals. At the moment, the DXY is up only 0.08% on the day at 91.28.

Later in the session, BoC Governor Tiff Macklem will be delivering his remarks on the policy outlook at a press conference.

Technical levels to watch for