Bank of Canada hikes the rates!
As widely expected, the Bank of Canada (BoC) lifted interest rates by 50 bps from 1.0% to 1.50% on Wednesday. However, we had many other analysts looking after a 75 bps rate hike.
Canadian central bank increased the rates to combat inflation, and it was a correct decision. However, we should remember that the point considered a problem in many countries is a potent stimulus for the Canadian economy. That is nothing but the rapid rise in oil prices.
Canada's Q1 GDP numbers were released on Tuesday, and it was much better than expected to confirm a solid start for the economy in 2022, thanks to solid oil export. Besides that, the labor market has been firm overall in 2022, while recent activity data include a 2.5% gain in March manufacturing sales and a flat reading for March retail sales. With all these mentioned news and data, investors are still waiting to see even better numbers for the whole year of 2022. Moreover, it was the main reason for those analysts expecting to see a 75 bps rate hike and not 50!
Loonie, after this event, got some power against its crosses; however, later on, and with reinforcement of the US dollar, lost the ground against that to reverse the USDCAD price movement. Technically also, it is trying to reverse the downtrend, as you can see in the bellow figure. Oil price is already so high, and the US dollar index is also growing thanks to its safe-haven demand; therefore, before the FED June meeting, even if we can not see the bullish, downtrend also could lose the steam.
