The Bank of Canada (BoC) hiked its benchmark interest rate by 50 basis points (bps) to 3.75% at the end of the October policy meeting this Wednesday. The decision to slow the pace of policy tightening comes amid growing worries about a deeper global economic downturn and disappointed market participants anticipating a 75 bps rate hike. 

Market reaction

The surprise move weighs heavily on the Canadian dollar and triggers an aggressive short-covering around the USD/CAD pair, which rallies nearly 150 pips from a three-week low touched earlier this Wednesday.