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Canadian dollar jumps as Bank of Canada lifts benchmark rate 25bps

Canadian dollar jumps as Bank of Canada lifts benchmark rate 25bps

The decision "implies that absent a significant shock, Wednesday's rate increase will be part of a larger and longer march towards interest-rate normalization", said Brian DePratto, TD Bank economist.

Furthermore, the central bank said it would pay "close attention" to how the economy responds to higher borrowing costs, given households have accumulated record levels of debt.

The come-from-behind economic recovery in Canada may be partly chalked up to fiscal stimulus more easily achieved in Ottawa than in gridlocked Washington, as well as the willingness of banks to lend, said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.

Recent better-than-expected data supports the view that growth is more "broadly-based and self-sustaining", the bank said, citing more "widespread strength" in business investment and exports, and "stronger-than-expected indicators of growth" globally.

Canada's biggest banks are poised to benefit from a surprise interest rate hike on Wednesday, with Royal Bank of Canada's (TSX:RBC) chief executive pegging the revenue bump at upwards of $300 million over five years.

The markets weren't anticipating an interest rate hike quite yet.

Mnuchin: Debt limit should be tied to Harvey funding
So, we need to put politics aside and we're going to be urging Congress to get both of those things done as quickly as they can. Mnuchin's spending-debt ceiling pitch resulted in a quick and favorable response from Congress's top two Democratic leaders.

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The military has conducted three tests in total, but during a test in June, the interceptor failed as a result of human error. Sailors aboard the destroyer USS John Paul Jones tracked it with radar and fired an interceptor missile to shoot it down.

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It continued, "Mattis did not reverse Trump or defy him on the broader ban against new recruits who are transgender people". Now, with Mattis' directive in hand, the Pentagon has six months to prepare before the ban is implemented.

Others predicted the bank would refrain from moving the rate out of concern such a move would drive up an already strengthening Canadian dollar and pose a risk to exporters. That marked the central bank's first rate hike in seven years.

Canada's currency climbed as much as 1.8 per cent after the decision, reaching $C1.2146 against its United States counterpart, the highest intraday level since June 2015, and extending the gain this year to 10 per cent.

What that all means, of course, is that anyone who's overextended on credit - and has been relying on historically low interest rates to keep afloat - could very quickly be in trouble. The next announcement is slated for October 25th, when the bank will also release its latest Monetary Policy Report. Given that overnight swaps had only afforded a 44 percent probability that the central bank would move at today's meeting, the Canadian Dollar responded with an abrupt rally as its yield advantage leveraged the general appetite for return and risk appetite. It said the Canadian dollar has appreciated - roughly 10% in past three months - and that reflected both domestic strength and weakness in the US currency amid "significant geopolitical risks and uncertainties around" the renegotiation of the North American Free-Trade Agreement, and USA fiscal policy. The suggestion is the Canadian dollar gains aren't totally reflective of growth.

Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation.

It noted that inflation remained below its 2.0 percent target, but said there is still some excess capacity in the labor market, and wage and price pressures "are still more subdued than historical relationships would suggest".

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