Canadian Dollar Rises after Bank Signals a Rate Hike
Earlier today, a report from the financial post noted that the Canadian dollar has climbed making it to the top in almost two months of raising prospects that interest rates could rise as soon as possible.
“The U.S. dollar appeared to be treading water, as traders awaited the start of a two-day meeting for signals on the pace of future monetary tightening”. Noted the financial post.
Senior Carolyn Wilkins from the bank stated “as growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required.”
It was due to this that traders worked hard enough making the currency rise up to 1.5 per cent to trade at 75.36 US cents late last Monday and early this Tuesday whilst the loonie traded at 75.45 per cent alongside the other currencies.
Greg Gibbs, founder of Amplifying Global FX Capital in Colorado, stated “USD/CAD has broken a recent uptrend, Canadian yields have jumped sharply, and market positioning has been caught out well short the Canadian dollar. This creates a risk of further significant gains in CAD near team.”
It is learnt that many economist had low expectations of the bank raising profits this year, turning their expectations towards next year 2018.
Lee Hardman, currency economist at MUFG, stated, “the market had been overlooking the strength economic data from Canada, and obviously now that we’re starting to see some change in communication from the Bank of Canada to acknowledge that… the market won’t be able to look through that. The shift to a more hawkish stance will offer the potential for the Canadian dollar to strengthen further from here.”
Investors will have to focus any clues on the threads of treks in the following months and its appraisal on the country’s recession and angle on hikes considering the decision made by the U.S Federal Reserve (FED) to boost the interest rates on its meeting last Wednesday.
Due to the central bank’s plan for trimming its balance sheet, investors will have to be cautious of any new particulars.
Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo stated, “given that the minutes (of the last Fed meeting) contained lots of details, one possible scenario is that there will be an announcement in June and that it will start in September.