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You are here: Home / Canadian Dollar / Bank of Canada raise interest rates boosting Canadian Dollar

Bank of Canada raise interest rates boosting Canadian Dollar

September 6, 2017 by Lewis Edmonds

Bank of Canada raise interest rates boosting Canadian Dollar

The Canadian Dollar strengthened during Wednesday’s afternoon trading session following a surprise decision from the Bank of Canada (BoC) to raise interest rates to 1.0%. This helped the Canadian Dollar to drop below 1.60 against the Pound, a level which hasn’t been tested since January of this year. The Canadian Dollar also surged to a 2 year high against its US Dollar counterpart following the announcement of the BoC’s decision to raise rates, the exchange rate dropped nearly 3 cents in a matter of seconds.

The markets weren’t anticipating an interest rate hike quite yet. In fact, a recent poll had showed a 41% chance of a rate hike at today’s BoC meeting, with most analysts expecting a rate move in October instead.

One of the main reasons for an interest rate hike was the exceedingly strong upturn in Q2 economic growth, in particular Q2 GDP figures which showed a 4.5% increase from the last quarter. The Bank of Canada have made it clear that any future interest rate decision will be made solely on economic data releases, and as such have not given any further signals to monetary policy decisions. Reading around the subject, it seems as though the consensus is for another rate hike in the last quarter of 2017 with the momentum leading into another rate rise in early 2018. As previously mentioned, this is dependent on how the Canadian economy reacts to the interest rate hike, with particular attention being paid to household debt moving forward.

For now, the markets remain fairly volatile. The Canadian Dollar has also further benefitted against the US Dollar following US Federal Reserve Vice President Fischer’s decision to step down due to personal reasons. This could mean a US interest rate hike is off the cards for now and as such saw investors remove funds away from the USD, ultimately weakening it.

Filed Under: Canadian Dollar Tagged With: Bank of Canada, Canadian Dollar strength, GBPCAD, interest rates

The information on this website is provided for information purposes only. It does not constitute advice to any person on any matter. Every reasonable effort is made to ensure that the information is accurate and complete but we assume no responsibility for and offer no warranty with regard to the same.

About Lewis Edmonds

When he is not offering insights into the what is happening on the currency markets Lewis manages key relationships for an authorised payment institution in the UK.

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