The Canadian dollar is back to where it was before the Bank of Canada decision to hike interest rates by 25 bps. The move took the overnight rate to 4.75%, which is the highest since 2001 and will add to the squeeze on consumers.
Perhaps mitigating the decline was that the BOC toned down the hawkish rhetoric in the statement, suggesting that they aren't eager to hike further.
Still, the hike brings Canadian short-term rates closer to the US and among the highest in the world. All that's suportive for the loonie and the gains in oil and gas are also positive today so it's not a surprise that the loonie is the best-performing major currency today.
However it's given back nearly all the gains since the BOC decision.
Next for the Canadian dollar is tomorrow's speech from BOC deputy Beaudry. The day-after speeches are designed to clarify Bank of Canada decisions and we could see some decent moves in CAD on that. Right now, the market is pricing in a 60% chance of a hike at the July 12 BOC meeting and a 35% chance of yet-another hike in September.
