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Forex News: Canadian Dollar Spikes Up As BoC Lifts Benchmark

Canadian Dollar Spikes Up As BoC Lifts Benchmark Rate Unexpectedly

09/06/2017 - 10:40:00 (RTTNews)

(RTTNews) - The Canadian dollar climbed against its key counterparts in early New York deals on Wednesday, as the Bank of Canada raised its benchmark rate unexpectedly given recent stronger-than-expected economic data.

The BoC upped its key interest rate to 1 percent from 0.75 percent. Economists had forecast the rate to remain unchanged.

In its accompanying statement, the BoC noted that the recent economic data had been stronger than expected, supporting the Bank's view that growth in Canada is becoming more broadly-based and self-sustaining.

The Bank continues to expect a moderation in the pace of economic growth in the second half of 2017, although the pace of growth is now higher than the Bank had expected, it added.

Meanwhile, caution prevailed as North Korea warned of "more gift packages" to the United States just days after it successfully carried out a hydrogen bomb test.

Also, investors are eager to see whether the European Central Bank will send a new policy message regarding the timing of an exit from its ultra-loose monetary policy at its policy meeting, scheduled for Thursday.

Data from Statistics Canada showed that Canada's merchandise trade deficit narrowed to C$3.0 billion in July from C$3.8 billion in June. Economists had forecast a shortfall of C$3.3 billion Imports fell 6.0 percent, while exports decreased 4.9 percent.

The European Central Bank meets on Thursday and it isn't entirely clear whether the central bank will send a new policy message regarding the timing of an exit from its ultra-loose monetary policy.

The loonie slipped against its major rivals in the Asian session, as Asian shares fell amid geopolitical concerns following North Korea's nuclear test on Sunday.

The loonie climbed to 1.2136 against the greenback, a level not seen since June 2015. Continuation of the loonie's uptrend may see it challenging resistance around the 1.17 region.

The loonie reversed from an early 5-day low of 1.4812 against the euro, reaching a 1-1/2-month high of 1.4484. The loonie is poised to target 1.43 as the next resistance level.

Figures from Destatis showed that German factory orders declined unexpectedly in July on weak domestic demand.

Factory orders fell 0.7 percent month-on-month in July, in contrast to a revised 0.9 percent rise in June. This was the first fall in three months. The loonie spiked up to a 21-month high of 89.74 against the Japanese yen, after having fallen to a 6-day low of 87.55 at 3:00 am ET. The next possible resistance for the loonie-yen pair is seen around the 92.00 mark.

Preliminary report from the Ministry of Health, Labor and Welfare showed that Japan's total labor cash earnings decreased for the first time in fourteen months in June, defying economists' forecast for a further rise.

Gross earnings dropped 0.3 percent year-over-year in July, reversing 0.4 percent rise in May, which was revised from a 0.4 percent fall estimated previously.

Following a 5-day low of 0.9926 hit at 9:15 pm ET, the loonie reversed direction and strengthened to an 8-month high of 0.9676 against the aussie. The loonie is seen finding resistance around the 0.95 mark. Looking ahead, at 2:00 pm ET, U.S. Federal Reserve releases Beige Book report.

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