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Loonie rallies after BOC rate decision

Published December 8, 2016
  • The Canadian dollar strengthened to a near seven-week high against USD on Wednesday as investor reaction to the Bank of Canada's interest rate decision offset lower oil prices
  • Sounding less dovish than we would've expected, Bank of Canada used language suggesting a rate cut is off the table as global growth picks up
  • It also moved from the pessimistic tone it set in October’s meeting, pointing to reasons why Canada would not follow the U.S. Federal Reserve in raising rates and a "significant" amount of slack in the Canadian economy
  • The U.S. dollar declined on Wednesday as Treasury bond yields eased and investors looked ahead to next week’s Federal Reserve meeting, when they are expected to raise interest rates but adopt a cautious tone on the economy
  • The broader trends for the market beyond the holiday season should be dictated by stronger growth and rising interest rates in the U.S., and that should be positive for the U.S. dollar
  • In the Euro Zone, the Central Bank extended its quantitative easing program to the end of 2017
  • While an extension was expected, the details were a bit of a surprise; the euro strengthened immediately after the decision
  • The value of Canadian building permits in October climbed 8.7% vs -0.7%, as builders in Alberta file permits in advance of changes to the province’s building code
  • US initial jobless claims data for the week came out in line with the forecast