The Canadian Dollar looks like it is still holding its’ almost 2-1/2 month high over the US dollar today, after the hawkish Bank of Canada prompted certain investors to “price in rate hikes” in the immediate future, rather than waiting until a later date.
Today, the Canadian dollar added to the gains achieved, after release by central bank of its Monetary Policy Report.
Canadian economist and strategist in currency with New York’s Nomura Securities International, Charles St.-Arnaud, stated:
“Yesterday, I think the market was a bit surprised by how hawkish the Bank of Canada sounded in their communique. Today, the Monetary Policy Report only confirmed and gave a bit more detail on the outlook, on the quarterly forecast. Any possible rate move later in the year would be conditional on what risk is doing, what the tension in Europe is doing.”
Just after noon, the Canadian dollar was C$0.9483 to the US. dollar – up $1.0545 from close for North America at C$0.9457 to US. – $1.0574… the best it has looked since the 2nd of May.
Managing Director of foreign exchange at the National Bank of Canada, Jack Spitz said:
“There was an upsize in terms of inflationary expectations by the bank in the short term, but really the market sentiment with respect to the Canadian dollar was changed in conjunction with yesterday’s policy guidance.”
Spitz also claimed that other factors, which include equity market sentiment and crude prices continue to be influential drivers, as well as the comments by the central bank, which held the 1.0% overnight rate Tuesday, no surprise, but core inflation will bring it to the 2% target before forecast as they see a speed-up in domestic economic growth in the last six months of 2011, as opposed to increasing risks overseas.
Canadian prices of bonds were for the most part lower, a possible indicator that before this year’s end, increases in interest rates are inevitable.
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