The Canadian dollar climbed today after the Bank of Canada left its key overnight rate at 1 percent and hinted that interest rates hikes may follow in the future despite weakening global economic growth.
Canada’s central bank left its target interest rate at 1 percent. The BoC said in the statement:
To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2 per cent inflation target over the medium term. The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.
The suggestion of removing monetary stimulus is bold, considering the current unfavorable global economic conditions. In fact, the central bank noted that “the outlook for global economic growth has weakened in recent weeks”. Nevertheless, the statement was hawkish and lifter the Canadian currency.
USD/CAD was down from 1.0390 to 1.0380, following the rise to 1.0424, and EUR/CAD fell from 1.2986 to 1.2922 as of 22:28 GMT today. CAD/JPY advanced from 75.35 to 75.84.
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