With all of the uncertainty, surrounding the British Pound and the Euro it might be time to look elsewhere and the Canadian dollar might be a good place to start.
Data out last week showed Canada’s annual inflation jumping to 3.0 per cent, coming in well above consensus with Analysts expecting a figure 2.5 percent
This marks its highest level for many years and it seems like the higher oil prices are now starting to filter through to the Canadian consumer and the chances of the Canadian economy overheating are growing.
Many were surprised the Canadian dollar to jump further after the news.
“With that size of a shock, the Canadian dollar probably should have moved more,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
The Bank of Canada have already raised rates 4 times since last year to 1.5 percent and before the latest inflation announcement the odds of another hike were sitting at 20 percent but this has now grown significantly.
A 25 basis rate hike in September would push the overall benchmark interest rate to 1.75 percent which would make the Canadian dollar attractive for investors chasing a higher yield and this is bound to lend some good support.
“Today’s CPI figures are yet another data point that supports the Bank of Canada’s assessment that the economy is operating close to capacity and further rate hikes will be needed,” said Ranko Berich, head of market analysis at Monex Canada and Monex Europe.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 61% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 61% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.
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