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Bank of Canada hikes interest rate to 1.5%

Wednesday 1 June, 2022

Daily Currency Update

The Bank of Canada on Wednesday raised its overnight interest rate by 50 basis points to 1.5% for a second consecutive time as expected. The central bank delivered a hawkish statement following the interest rate decision, saying policymakers were prepared to act "more forcefully if needed" to curb inflation. Data released on Wednesday also showed that Canadian manufacturing activity expanded at a faster rate in May, as the sector raised output to meet strong demand for goods. The seasonally adjusted S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) registered 56.8 in May, up from 56.2 in April.  Stronger demand, particularly for consumer goods, were recorded during the month. Some analysts pointed to this as a small signal that inflation pressures showed signs of easing. The Canadian dollar was little changed against a broadly stronger US dollar following the announcement. USDCAD was trading around 1.2639 at the time of writing.
		

Key Movers

Demand for the US dollar jumped against a basket of currencies on Wednesday following data that showed US manufacturing activity rose to 56.1% in May from 55.4% in the prior month. The US Dollar Index was up 0.81% at 102.58 at the time of writing. Eurozone inflation reached a record high of 8.1% year-on-year in May. The euro weakened against the US dollar on Wednesday, but it could be due to receive a boost from European Central Bank actions. The pressure is mounting on the central bank to combat record levels of inflation with their most aggressive tightening cycle in history. The euro may therefore indirectly benefit from higher levels of inflation, as it has become clear that the ECB are now at a position where they are ready to act on it. EURUSD was down 0.82% at around 1.0641 at the time of writing.  

Expected Ranges

  • EUR/CAD: 1.3452 - 1.3584 ▼
  • GBP/CAD: 1.5778 - 1.5959 ▼
  • AUD/CAD: 0.9064 - 0.9119 ▲
  • USD/CAD: 1.2616 - 1.2676 ▼