The Bank of Canada left the overnight policy rate unchanged at its April meeting, in line with consensus expectations. UBS analysts noted that the more important decision taken during the monetary policy meeting is the revision to Canada’s economic outlook. The central bank raised its 2016 GDP growth forecast to 1.7% from 1.4%. Key Quotes “The upbeat tone of the official statement as well as the governor's press conference confirmed our view that things are slowly improving for the country’s economy and that this will support its currency. We continue to recommend an overweight position in the Canadian dollar, financed with an underweight in the Australian dollar.” “April’s meeting was the first time the Bank of Canada could account for the newly announced national budget, which it believes will boost GDP growth by 0.3 percentage point both this year and next. The meeting also discussed the latest developments in global financial markets as well as the US economy, which it surprisingly judged as overall slightly negative for Canadian growth. Nonetheless, the bank believed that "the positive forces at work in the economy are starting to outweigh those that are negative." Thus, the meeting concluded with the first upward revision to Canadian GDP after five successive quarters of downward revisions, and a judgment that the worst may be over for the Canadian economy.” “We would agree with this stance and expect the Canadian dollar to remain supported over the medium term. Over the very short term, however, we think the risk of a setback has increased following the recent rally in the CAD as well as global oil prices. We therefore cannot rule out the USDCAD trading above 1.30 again. We continue to recommend overweighting the Canadian dollar against another commodity currency – the Australian dollar – which remains overvalued in our view.” For more information, read our latest forex news.