The Forex market was largely driven by central banks’ meeting during the past trading week. Yet the Canadian dollar had its own bullish factor that allowed it to ignore other news for the most part and to become the strongest major currency by the weekend (though other commodity currencies were strong as well).
The aforementioned factor that contributed to the amazing performance of the Canadian dollar was the speech of Carolyn Wilkins, Bank of Canada Senior Deputy Governor. She was rather optimistic in her speech and stated:
As growth continues and, ideally, broadens further, Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required.
Markets interpreted the words as a sign that the central bank closed the doors to an interest rate cut, and the next move should be a hike. The BoC will make its next policy decision on July 12, though at present it does not seem likely that a hike will happen at that meeting.
The Federal Reserve hiked its main interest rate and signaled that it still has plans for three hike this year in total, boosting the US dollar. But many analysts doubt that the current situation warrants such aggressive monetary tightening.
The Bank of England kept its policy unchanged, but market participants were surprised to see that three voting members wanted to raise interest rates instead of one as at the previous meetings. That helped the Great Britain pound to gain strength.
USD/CAD dropped 1.8% from 1.3457 to 1.3210. EUR/CAD fell 1.9% from 1.5077 to 1.4789. CAD/JPY rallied as much as 2.4% from 81.93 to 83.89. CAD/CHF jumped 2.5% from 0.7190 to 0.7369.
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