Canada's economy concept with canadian flag and money dollar currency golden symbol.

Bank of Canada Close To Raising Interest Rates

Date of publication: July 7, 2017 | Author: Tim Clayton

The latest Canadian employment data was stronger than expected with an increase in jobs of 45,300 for June compared with expectations of an increase around 12,000 and this followed an employment increase of over 50,000 for May. The unemployment rate declined to 6.5% from 6.6% which equaled the lowest level for over 8 years. The employment releases have been consistently strong with 11 of the 12 monthly releases stronger than consensus market forecasts.

The data overall has been consistently strong over the past few weeks. The Canadian dollar made further strong gains following the data with USD/CAD at 10-month lows near 1.2860

The Bank of Canada is now more optimistic surrounding the economic outlook and there have been consistent comments from bank officials that low interest rates have done their job in supporting the economy. The bank also does not want to wait until it is too late in raising rates.

Given the cumulative evidence, there is an increasing chance that the bank will decide to increase interest rates from the current 0.5% at the July 12th policy meeting. What make this prediction even stronger is the fact that the Canadian dollar strengthens sharply after Bank of Canada signal a few weeks ago. Any increase would be the first since September 2010.

Any increase in rates would support the Canadian dollar, although the currency has already made strong gains which will limit the scope for a further advance.

Investors needing to sell Canadian dollars for Sterling should look to wait for potential GBP/CAD levels near 1.6250.


 timTim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics. 


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