Adding to the downward pressure on the loonie is the Bank of Canada's declaration that its hiking campaign is currently on pause From m_zadikian
The Bank of Canada might be forced to hike its benchmark rate as markets price in three more rate increases for the Federal Reserve. REUTERS/Blair Gable
Financial markets are pricing in at least three more quarter-point hikes from the U.S. central bank, which would take its terminal rate range to 5.25 per cent to 5.50 per cent. Expectations for Fed hikes rose after the U.S. central bank'son Friday, the latest in a string of data showing that economy is still running hot.
"The sudden reassessment of the potential for even more Fed rate hikes follows soon after the Bank of Canada rather publicly planted its flag in the on-pause field," Porter said. Porter says there are two main reasons the Bank of Canada could consider deviating from the Fed in terms of rate hikes: Wage and price pressures are less intense in Canada, and Canadians are much more indebted than U.S. households, making the country more sensitive to rates.It's the loonie that will "act as a limiter on the extent of that deviation," he adds.
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