Sudden Increase In Canadian Dollar’s Value Might Not Last Long

People are rejoicing with the currency exchange Vancouver as Canadian dollar takes center stage with a spike. The increase came after the announcement made by the Bank of Canada regarding increasing the interest rates starting the month of July. According to analysts, the gains currently experienced by the currency might not last long.

The cash rate of the Bank of Canada remains at 1.25 per cent for the following month but there have been some changes with their statement that the market was taken by surprise. This is also the reason why the bids are higher than before. In terms of their future policy moves, there are some words that were omitted such as over time and cautious. The only word that was left in the statement was gradual. Based on a number of observers, this meant that the council in charge has higher confidence with regards to increasing the July rate. Not to worry though because a faster rate is not yet in the horizon.

According to CIBC Capital Markets’ economist, Royce Mendes, the reason why they emphasized the gradual increase in the future policy adjustment is because they wanted to make a final move for 2018 and that is to increase the rate in July. In fact, the statement clarified that the Bank will not have any reactions towards the inflation which might have been over the limit by a fraction.

The attention of the market was caught because they were not expecting to find any changes in the policy. More importantly, traders are expecting that the increase in the rate will be discussed at the meeting to be held in July.

The increase in the interest rate has been initiated by the Bank of Canada thrice in 2017. The market is already expecting that there is a 50 per cent chance that the initiative will once more come from the bank. Mendes said that the positive increase in the currency exchange Vancouver was brought about by the fact that there is an upcoming increase in the rate. At this time, the number has only been considered partially into the ever-changing market.

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