Bank of Canada raises interest rates by 25bps
Daily Currency Update
The unexpected decision by the Bank of Canada to restart its interest rate-hiking campaign on Wednesday meant the Canadian dollar rose 0.3% yesterday following the surprise.The CAD is on track to reach its strongest level since May, it was the second-best performer among its peers in the Group of 10. The economy is expanding at an accelerated pace despite higher borrowing costs and increasing economists’ forecasts for the Bank of Canada to resume rate increases after they decided to pause in January when it boosted the lending rate to 4.5%.
Key Movers
This upward trend in the pound is particularly strong against the euro, as sterling broke to fresh year highs last week against the euro currency. With little market-moving news or central banker speeches, we’ve seen the pair trade at the 1.16 resistance level. With the pair now at 6-month highs general weakness on the Euro has helped the pound, the reason for this is a mixture of energy prices, inflation, and key central bank speakers.Eurozone GDP is out at 10 am and could indicate where the euro will finish the week versus its G10 peers. Current levels present a great opportunity to buy euros.
Money markets are now pricing in almost a one-third chance that the Fed raises rates by 25bps at its policy meeting next week, which could provide volatility following the decision.
Expected Ranges
- GBP/USD: 1.2250 - 1.2550 ▲
- GBP/EUR: 1.1350 - 1.1700 ▲
- EUR/USD: 1.0550 - 1.0800 ▲