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Forex News: Canadian Dollar Rallies After BoC Rate Hike

Canadian Dollar Rallies After BoC Rate Hike

07/12/2017 - 10:45:00 (RTTNews)

(RTTNews) - The Canadian dollar spiked up against its major rivals in the New York session on Wednesday, as the Bank of Canada raised its benchmark rate, citing robust domestic economic growth and the absorption of excess capacity in the economy.

The BoC raised its benchmark rate by 25 basis points to 0.75 percent from 0.50 percent. The decision was in line with expectations.

The bank noted that Canada's economy has been robust with growth broadening across industries and regions. As the adjustment to lower oil prices wanes, both the goods and services sectors are expanding.

The BoC also indicated that soft inflation appears to be mostly temporary and as excess capacity is absorbed, the inflation is forecast to return close to 2 percent by the middle of 2018.

Crude prices rose after data from the American Petroleum Institute showed a larger-than-expected draw in U.S crude inventories last week. The API report showed a fall of 8.133 million barrels in crude oil inventories, higher than estimates for a drop of 2.99 million barrels for the week ended July 7.

Crude for August delivery rose $1.13 to $46.17 per barrel.

The loonie traded mixed against its major rivals in the European session. While the loonie rose against the euro and the greenback, it fell against the aussie and the yen.

Bouncing off from an early 5-day low of 87.42 against the Japanese yen, the loonie edged up to 88.28. The loonie is likely to find resistance around the 90.00 mark.

Data from the Ministry of Economy, Trade and Industry showed that Japan's tertiary industry activity dropped in May after recovering in April.

The tertiary industry activity dropped 0.1 percent month-on-month in May, reversing a 1.4 percent rise in April. However, the pace of decrease was slower than the expected 0.5 percent fall.

The loonie firmed to near a 1-year high of 1.2826 against the greenback, off its early low of 1.2939. On the upside, 1.265 is possibly seen as the next resistance level for the loonie.

The loonie climbed to 1.4633 against the euro, its strongest since April 24. The next possible resistance for the loonie may be found around the 1.43 level.

Data from Eurostat showed that Eurozone industrial production growth improved more than expected in May.

Industrial output grew 1.3 percent on a monthly basis, faster than the revised 0.3 percent increase seen in April.

The loonie reversed from an early 8-day low of 0.9924 against the aussie, recovering to 0.9829. If the loonie extends rise, 0.97 is possibly seen as its next resistance level.

At 11:55 am ET, the Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will hold a press conference to discuss the monetary policy report in Ottawa, Ontario, Canada.

The Fed is scheduled to release its Beige Book on economic condition at 2 pm ET.

Kansas City Fed President Esther George is set to speak in Denver at 2:15 pm ET.

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