THE BANK OF CANADA SURPRISES FINANCIAL MARKETS AND RAISES INTEREST RATES AGAIN
HIGHER RATES HIGHER CANADIAN DOLLAR
The Bank of Canada increased interest rates 0.25 basis points, bringing the overall base rate to one percent, marking the second rate rise since July. The Bank of Canada decided on the rate hike, as it saw Canada's current strong economic performance pointing to further, more self-sustaining growth.
The market reaction saw the Canadian dollar move sharply higher against all its major counterpart currencies. The USDCAD pair immediately fell lower, hitting 1.2133 after previously trading above the 1.2400 handle. The USDCAD would eventually fall even further, with the pair breaking below the 1.2100 level.
ECB PAVES THE WAY FOR OCTOBER
The European Central Bank left interest rates and QE stimulus unchanged this week, with ECB President Mario Draghi stating that the European Governing Council, will have a decision on monetary stimulus reduction ready, for the upcoming ECB meeting in October.
Mario Draghi also said that the ECB had upgraded the economic outlook for the Eurozone, to levels not seen since 2007. The market reaction saw the single currency move to a new 2017 trading high, with the euro again breaking above the 1.2000 level, and reaching 1.2089 against the U.S dollar.
RBA STILL ON HOLD
The Reserve Bank of Australia kept its official cash rate on hold, at a historic low, of 1.5 per cent, for the thirteenth consecutive month in a row. The RBA warned that the rising Australian dollar was starting to weigh on economic growth, with low inflation and stagnant employment levels.
After the policy statement, the Australian dollar briefly dipped lower against a basket of currencies, as policymakers took a more dovish tone than expected. The Aussie soon recovered, with the AUDUSD pair breaking above the $0.8100 cents level, as the U.S dollar index fell and the price of gold continued to climb.
STERLING LOOK PAST WEAKER ECONOMIC DATA
The British pound looked past weaker economic data this week, with the GBPUSD pair breaking above the psychological 1.3000 level, and trading above the 1.3100 technical level for the first time in over a month.
Earlier in the week, the United Kingdom economy released August's PMI construction data, which fell to 51.1, marking the weakest reading in over twelve months. The UK services PMI also came in at an eleven month low, falling to 53.2, from the previous months reading of 53.8.