The Canadian dollar strengthened against the US Dollar on Tuesday as fears over the Omicron variant of covid-19 lessened worldwide; also, investors await the Bank of Canada’s monetary policy announcement on Wednesday, where it may address market expectations of successive rate hikes next year.
Investors have been snapping up Canadian dollars ahead of Wednesday’s monetary policy announcement. The Bank of Canada is widely anticipated to leave interest rates unchanged but given consistently positive data, they will reaffirm plans to raise interest rates early next year. When the BoC last met in October, they surprised the market by ending Quantitative Easing suddenly and advanced their forecast for a rate hike from the second half to second quarter of 2022.
Since then, the economy persists to recover from earlier restrictions. Job growth blew past estimates in November with more than 153,000 workers finding new employment. The labor market is not only back to pre-pandemic levels, but the economy is at full employment. As indicated by yesterday’s IVEY PMI report, manufacturing activity is up and most importantly, inflation is growing at its fastest pace since 2003.
Looking forward, today we expect massive volatility at the time of the Canadian monetary policy.
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