The Canadian dollar surged by a penny against USD after the Bank of Canada came out with a statement that was surprisingly optimistic about the economy. Importantly, the Bank indicated that a rate hike might be in the offing next year, as opposed to the previously projected hike in 2023. The Bank also announced a reduction in its bond buying program but that part had been expected. Instead, it was statements like these that revealed the its evolving thinking and surprised the market: “The outlook has improved for both the global and Canadian economies. Activity has proven more resilient than expected in the face of the COVID-19 pandemic…” While the economic boom has been obvious to observers for a while, it was still surprising to see a central bank acknowledge it given previously overly cautious tone. This morning’s unexpectedly low jobless claims in the US is another indication that the economic recovery is in full swing and the Fed is likely not far behind the Bank of Canada in adjusting its tone. The Canadian dollar is now trading at the very top end of the range in which it has been trading for the last month.
