The Canadian dollar jumped after the Bank of Canada left the main interest rate unchanged. The positive fundamentals may spur the Canadian currency even further to the upside.
Conditions in global financial markets have deteriorated as the sovereign debt crisis in Europe has deepened. Additional measures will be required to contain the European crisis. The recession in Europe is now expected to be more pronounced than the Bank had anticipated in October, as a result of increased deleveraging and tighter financial conditions, as well as necessary fiscal austerity and structural reforms.
The statement wasn’t as dovish as most market analysts have expected. The central bank mentioned that the economy of the United States was slightly better than previously estimated, while regarding the domestic fundamentals the BoC wrote “recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October”.
The fundamental indicators indeed were good yesterday. The building permits demonstrated a big jump in October, rising 11.9 percent, and the IVY Purchasing Managers’ Index advanced from 54.4 to 59.9 in November, much more than was expected.
USD/CAD slumped from 1.0162 to 1.0098 yesterday and traded at 1.0092 as of 3:00 GMT today. EUR/CAD slumped from 1.3616 to 1.3531 on yesterday’s trading session before trading near 1.3542 today. CAD/JPY was up from 76.52 to 76.92 yesterday and traded at about 76.96 today.
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