Last week, the Bank of Canada once again raised its benchmark interest rate, with the BOC stating it sees the economy’s powerful performance pointing to broader, more self-sustaining growth. The central bank hiked rates by one-quarter point to 1%, its second 0.25-basis-point increase in as many months.
After the Bank of Canada raised rates, the policy statement was notably hawkish, stating that solid Canadian employment and wage growth led to strong consumer spending, while the key areas of business investment and exports also improved.
The Bank of Canada (BOC) also said “Recent economic data has been stronger than expected, supporting the bank’s view that growth in Canada is becoming more broad-based and self-sustainingâ€.
It also pledged to pay particular attention to the economy’s potential, job-market conditions and any potential risks for Canadians from the higher costs associated with borrowing.
The market reaction saw the Canadian dollar move sharply higher against a basket of top-tier currencies, with the USDCAD pair crashing to 1.2133, after previously trading above the 1.2400 handle.
The European Central Bank (ECB) left its benchmark interest rate unchanged at record lows, with President Mario Draghi noting the governing council would make a decision in the autumn about future policy changes.
The ECB also raised its forecast for GDP growth this year from 1.9% to 2.2%, which would be the fastest growth rate since the 2007. However, the policy statement said, despite the pick-up in growth, in the Eurozone remains slower than the ECB’s target of 2%.
The EURUSD pair reacted positively to Mario Draghi’s comments, and yet again moved above the 1.2 level. The EURUSD later moved to a new 2017 trading high, moving closer to the 1.2100 level, as the US dollar index tumbled to multi-year lows.
The Reserve Bank of Australia (RBA) kept the official cash rate at an historic low of 1.5%, which was widely anticipated by economists and investors.
