Bank of Canada Hikes, but Signals Pause
Markets by TradingView
The Bank of Canada raises its interest rate as expected, but dovishly signals it now wants to pause any further hikes, generating minor weakness in the Loonie.
- The Bank of Canada raised rates by 0.25% yesterday to 4.50%, putting its rate as the joint highest of all major currencies. The Bank signalled it does not foresee further rate hikes in the near term and that it hopes to pause from making any more changes. The market saw this as a minor dovish tilt, weakening the Canadian Dollar slightly.
- Global stock markets have mostly risen over the past day, with the S&P 500 Index moving closer to making a golden / bull cross. The Chinese Hang Seng Index rose strongly to reach a new 11-month high price, adding to a very strong advance over recent weeks.
- The long-term bullish trend in Gold remains valid after Gold make a new 9-month high yesterday at $1948, and we have seen Copper maintain its recent strong bullish breakout. These assets are attractive to long-term trend traders in the long direction right now, as higher prices here are likely over the coming days.
- In the Forex market, the US Dollar is again declining weakly, but the US Dollar Index is very close to support, which is looking likely to hold, possibly stalling much further decline. The Australian Dollar is clearly the strongest major currency after yesterday’s higher inflation print raised expectations the RBA will hike rates in February, while the Canadian Dollar is the weakest following yesterday’s dovish tilt by the Bank of Canada. The EUR/USD currency pair remains within a valid bullish trend and has risen to stand just a few pips short of a 9-month high above $1.09, so it is likely we will see higher prices there over the coming days.
- Markets are awaiting the release of US Advance GDP data, which is expected to show GDP increasing at an annualized rate of 2.6%. Markets are fearful of a US recession, so significantly worse data could cause volatility in the market, especially in the US stock market which would likely fall quickly.
- It is a public holiday in China all week due to the Chinese New Year.
- Daily confirmed new global coronavirus cases decreased last week for the fifth consecutive week, but there are serious doubts over the veracity of China’s official statistics, which almost certainly dramatically understate new coronavirus cases.
- Total confirmed new coronavirus cases worldwide stand at over 674 million with an average case fatality rate of 1.00%. Daily new confirmed cases have fallen to a low level not seen since the summer of 2020.