As the majority predicted, Governor Steven Poloz and the Bank of Canada raised the overnight target rate to 1.5%. Since the last rate hike in January, the Bank stood pat on further hikes in the previous three meetings; however the dovish nature to the statements began to diminish. That, coupled with the Fed raising their target rates in June, the quarter percent increase this morning shouldn’t have come as a surprise.
In May of last year, the Canadian dollar was probing down to the 72 US cent level for the first time since the early part of 2016. Sentiment was negative and analysts were projecting a potential move below 70 cents. The tide turned that month as the language from the Bank of Canada became less pessimistic and by July we finally had a rate hike which propelled the Loonie up to 80 cents and beyond. Is a similar recovery in the works?