Loonie Surges To 5 Week High After BOC Surprises With Hawkish Statement

While the Bank of Canada did not surprise with its interest rate decision, holding rates at 0.5% as expected, the market has read between the lines of the statement and concluded that it was substantially more optimistic than expected, with clear hawkish notes as a result of the following line: “The Canadian economy’s adjustment to lower oil prices is largely complete and recent economic data have been encouraging, including indicators of business investment.”
Additionally, the BOC has added a new line which now reads: ‘all things considered, Governing Council judges that the current degree of monetary stimulus is appropriate at present, and maintains the target for the overnight rate at 1/2 per cent” and replacing the previous conclusion which said there was “significant uncertainty on the outlook.”
And while the BOC hedged by saying “the uncertainties outlined in the April MPR continue to cloud the global and Canadian outlooks” the market is clearly more impressed by the hawkish readthru, sending the Loonie surging after the report.

This post was published at Zero Hedge on May 24, 2017.