As the market’s focus is focused on next week’s FOMC policy meeting, investors are also not forgetting the Central Bank of Canada (BOC) policy meeting that will take place tonight.
While no change in interest rates is expected, investors expect the central bank to reaffirm plans to raise interest rates early next year following economic data that continues to show positive figures.
This can be seen from the movement of the loonie currency which gained support to record its biggest increase in two and a half months against the US dollar.
At the October policy meeting, the BOC surprised the market by abruptly ending its bond-buying program and accelerating its forecast of interest rate hikes from the second half to the second quarter of 2022.
Since then, economic data has continued to show a consistent recovery, boosting optimism for the central bank to continue to offer a hawkish outlook for its monetary policy.
Canadian job growth beat market forecasts with over 153,000 finding new jobs. The labor market has not only returned to pre-pandemic levels but the economy is at full employment.
A hawkish (positive) statement from the central bank could significantly impact the loonie dollar to rise higher. On the other hand, if the BOC takes a step to return dovish following the uncertainty of the Omicron variant, the currency may return to record losses.
What are your thoughts on tonight’s BOC decision?
