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Canadian Dollar Drops in Face of Interest Rate Rise

Canadian flagThe Canadian dollar saw a significant loss in value on Wednesday after the country’s central bank made the decision to boost interest rates for the fifth time in fifteen months.

In a decision which gave clear signals to Canadian dollar traders of its future intentions, the Bank’s previous wording choices, which suggested that tightening would happen at a relatively slow rate, were gone. The value of the Canadian dollar dropped by 0.76%.

Other currencies to lose out over the course of Wednesday included the British pound, which went down by 0.39% to $1.293 against the US dollar. While the Japanese yen also faltered somewhat against the dominant dollar. The JPY/USD pair went down to 112.42 during the day.

Another significant interest rate decision is due today. The European Central Bank is due to announce its choice, although it is not expected to make any change to the current interest rate level of 0%. Any change is not expected to occur until at least next year.

The assumed move to halt rates for now will come in the midst of a serious budget issue for the EU. Italy’s draft budget does not conform to bloc-wide rules on borrowing. The European Commission this week informed the Italian government it has to re-submit its plans, which could result in a row on the horizon – especially if Italy’s populist government holds firm.

On Wednesday, the dollar surged by 0.8% against the euro and reached its strongest position since mid-August.

In addition to the European interest rate decision, there’s more for the forex trading community to keep an eye out for in the coming days and into next week.

US data on durable goods orders for September will come out at 12.30pm GMT, and a significant drop from 4.5% to -0.9% is expected.

However, when transportation is taken out of the equation the measure is expected to, in fact, rise – from 0.1% to 0.3%.

Into tomorrow, French producer price information for September and consumer confidence figures for October will be out at 6.45am GMT.

Preliminary core person consumption expenditures for the US in the third quarter of 2018 will follow at 12.30pm GMT. The quarter on quarter change is expected to drop by 0.3%.

Looking ahead to next week, the week will kick off with Italian producer price index data for September at 8am GMT on Monday.

British consumer credit information for September will follow at 8.30am GMT, while information on the Japanese unemployment rate will come out at the end of the day. Analysts expect this rate will rise slightly, from 2.4% to 2.5%.

The UK Budget will also take place on Monday, when Chancellor of the Exchequer Philip Hammond will set out the government’s spending plans for the coming year.

On Tuesday, Australian building permits information for September will be out at 12.30am GMT. Spanish retail sales information for September will come at 7am GMT, while overall preliminary European gross domestic product data will come out at 10am GMT.

 

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