- The Bank of Canada raised rates as expected and maintained the bullish bias.
- Trade concerns are left, right, and center, limiting the reaction.
- Trade issues could turn the tables for the BOC.
The Bank of Canada hiked the Overnight Rate from 1.25% to 1.50%. They cited a growing economy, a housing market that has stabilized and an upbeat forecast for inflation which is projected to rise to target by the second half of 2019.
Most importantly, the Ottawa based institution maintained its bullish bias by saying that "expects that higher interest rates will be warranted to keep inflation near target" in the last paragraph of the statement. The approach will remain gradual and the BOC stated itis data dependent, but that is not news.
Some had expected the Bank to take a "wait and see" approach after raising rates as some data such as wage growth, have moderated. Nevertheless, the BOC remained optimistic and said the economy is near capacity.
The intention to continue raising rates and the optimism about various parts of the economy lifted the loonie. The USD/CAD fell some 60 pips in the immediate reaction.
Trade, trade, trade, and trade
Nevertheless, the BOC did express concern about trade relations, the big elephant in the room which has a big trunk, if not Trump. Worsening trade relations with the US could not be ignored. The US imposed duties on steel and aluminum, Canada responded, and Trump refused to sign the G-7 communique after Canadian PM Justin Trudeau angered him.
The Bank of Canada mentioned trade no less than four times in the statement. The word appears six times. Here are some highlights:
- US Dollar strength is due to concerns about trade actions.
- The possibility of trade protectionism is the most important threat to global prospects.
- Trade tensions are weighing on investment in some sectors.
- The effect of trade tensions is now judged to be larger.
- The BOC will take into account the response of companies and consumers to trade actions.
The mere word count should be enough to convince that trade is a concern, and the content itself is quite alarming.
While the Canadian Dollar rallied on the bullish bias regarding interest rates, trade concerns could turn the tables and trigger a rethink on rates.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
USD/JPY holds positive ground around 151.50 following Japanese CPI data
The USD/JPY pair holds positive ground for the second consecutive day near 151.45 on Friday during the early Asian trading hours. The cautious approach from the Bank of Japan to keep monetary conditions accommodative exerts some selling pressure on the Japanese Yen.
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
Gold price finishes Thursday’s session set to reach new all-time highs
Gold price rallied during the North American session on Thursday and hit a new all-time high of $2,225 in the mid-North American session. Precious metal prices are trending higher even though US Treasury yields are advancing, underpinning the Greenback.
Top 3 Price Prediction BTC, ETH, XRP: Retail watches from the sidelines with a bias for shorts
Bitcoin is showing strength as markets head into the Easter holidays. As it rises, altcoins are following suit, with Ethereum and Ripple posting almost similar gains. Meanwhile, there remains an unfilled CME Gap, with a lot of liquidity also resting above and below BTC price.
Bears have been standing before a steamroller so far this year
Despite a pushback on rate cuts from Christopher Waller, and what was supposed to be cautious trading sentiment ahead of critical US inflation data released later on Friday, the S&P 500 rose on Thursday, marking its best first-quarter performance in five years.