The Bank of Canada has entered the go-slow lane which means traders could now unwind the largest net-long seen in CAD since 2012.

As was widely expected, the BoC held the cash rate steady at 1%. The central also reiterated a broadly positive outlook for the Canadian economy, but stopped well short of delivering the hawkish message that many had come to expect.

“While less monetary policy stimulus will likely be required over time, Governing Council will be cautious in making future adjustments to the policy rate,” says the BoC statement.

Policymakers also flagged a series of risks to their forecasts and lamented that a stronger than expected Canadian Dollar has led them to revise estimates of future inflation downward.

“The Bank projects inflation will rise to 2 per cent in the second half of 2018,” the BoC says. “This is a little later than anticipated in July because of the recent strength in the Canadian dollar.”

The upshot of Wednesday’s announcement appears to be that the Bank of Canada is now entering the go-slow lane after pushing through two back to back interest rate hikes earlier this summer.

The Pound-to-Canadian-Dollar rate traded rose by 150 points immediately after the announcement, taking Wednesday’s gain to 1.56% and seeing the pair quoted at 1.6902.

"Today's statement is clearly a move to a more dovish stance by Bank of Canada, and we find strong support to keep our forecast for a next move higher in rate to come only by the spring of 2018," says Nick Exarhos, an economist at CIBC Capital Markets.

BoC policymaker noted stronger than expected growth in the second quarter of the year, that was more evenly spread across regions and sectors. But they also forecast a moderation in the pace of growth over the second half and subsequent two years.

The Canadian Dollar fell broadly against the G10 basket, with the USD/CAD rate rising 0.72% to 1.2764 while the EUR/CAD price gained 1.16% to 1.5074.

Part of the reason behind the big swing by the Dollar in the aftermath of Wednesday's announcement is the culmination of positioning and expectations. During recent months, traders have steadily amassed the largest net-long position seen in the Canadian Dollar since 2012 during recent months.

Positions built in response to stronger economic momentum during the first half of the year and and in the wake of two back-to-back rate hikes from the Bank of Canada. These earlier moves from the BoC led markets to bet that further interest rate moves are in the pipeline for 2017 and 2018.

Net-longs remain at a multi-year high even after a partial unwind during early October, which came in response to a series of dovish statements by BoC policymakers and some softer economic data.

Get up to 5% more foreign exchange by using a specialist provider by getting closer to the real market rate and avoid the gaping spreads charged by your bank for international payments. Learn more here.