Rate hike to boost Canadian dollar
Published on 06.07.2018 18:05

The Canadian dollar reached a three-week high against the Greenback on Friday as oil prices rebounded from a string of recent losses as well as solid employment data, which greatly increased the odds that the Bank of Canada will lift, interest rates next week.

prices rose and data showing a stronger-than-expected rise in domestic jobs raised expectations for a Bank of Canada interest rate hike next week.

The number of new jobs added last month to the Canadian economy was 31,800 which was well above analysts’ expectations for a figure of 24,000 which has now put the chances of a rate hike when the bank releases their latest interest rate decision on July 11th at around 90 percent.

“The market’s view is that the bank will raise rates,” said Blake Jespersen, managing director, foreign exchange sales at BMO Capital Markets.

“You’ve also had oil prices steadily climbing higher so that’s also helping the Canadian dollar.” He added.

Oil is the backbone of the Canadian economy and has recently hit 3-year highs which has helped the Canadian economy immensely and in turn created a significant amount of new jobs.

One analyst believes that although the Canadian economy is powering ahead, the trade wars developing between the US and the rest of the world could derail many things such as the planned rate hike next week and especially if the planned talks over the weekend and early next week fail to deliver a suitable solution for all parties involved.

 “The big question for us remains will we get any escalation in the trade war between the U.S. and China over the weekend and early next week that could blow thing apart,” said Paul-Andre Pinsonnault, senior fixed income economist at National Bank Financial.

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Andrew Masters

Analyst

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