The Canadian dollar spiked up against its major counterparts in the New York session on Wednesday, as the Bank of Canada lifted its benchmark rate by a quarter point, as expected.
The BoC hiked its overnight rate to 1.75 percent from 1.50 percent. The decision was in line with forecasts.
The bank said that it expects inflation to remain close to the 2 percent target through the end of 2020. The Bank’s core measures of inflation also remained around 2 percent, consistent with an economy that is operating at capacity.
The Canadian economy would be supported by solid growth in both foreign and domestic demand and continuing favourable financial conditions, it said.
“Governing Council agrees that the policy interest rate will need to rise to a neutral stance to achieve the inflation target,” the bank said in the accompanying statement.
Oil prices rose despite the release of official data showing a larger than build in crude inventories last week.
Data from Energy Information Administration showed that crude oil inventories rose by 6.35 million barrels in the week to October 19. Economists were looking for a smaller build of 3.69 million barrels.
Crude for December delivery rose $0.51 to $66.94 a barrel.
The currency held steady against its major counterparts in the European session, with the exception of the euro.
The loonie strengthened to near a 2-week high of 0.9204 versus the aussie, after falling to a 2-day low of 0.9293 at 7:00 am ET. On the upside, 0.91 is possibly seen as the next resistance level for the loonie.
The loonie appreciated to 1.2992 against the greenback, a weekly high. This may be compared to a low of 1.3100 hit at 5:00 am ET. If the loonie rises further, it may find resistance around the 1.28 region.
Having dropped to 85.84 against the yen at 9:15 pm ET, the loonie changed direction and advanced to a weekly high of 86.63. The next possible resistance for the loonie is seen around the 88.00 level.
Final data from the Cabinet Office showed that Japan’s leading index climbed more than initially estimated in August.
The leading index, which measures the future economic activity, rose to 104.5 in August from 103.9 in July. The preliminary reading was 104.4.
The loonie strengthened to 1.4817 against the euro, its strongest since October 4. The loonie is poised to target resistance around the 1.47 level.
Survey data from IHS Markit showed that the Eurozone economy grew at the slowest rate for over two years in October as an export-led slowdown continued to broaden-out to the service sector.
The composite output index declined to 52.7 from 54.1 in September. The expected score was 53.9. Nonetheless, a reading above 50 indicates expansion.