The Canadian Dollar rose more than 1% versus the US Dollar yesterday after the release of Canadian GDP data showed an unexpected jump in the second quarter to 4.6% (quarter-over-quarter) against forecasts that productivity would be flat over the period. That has bolstered sentiment among FX traders that the Bank of Canada will likely hike interest rates next week when a policy decision will be made. Currently, the BOC lending rate is set at 0.75%, a rate set only this past July.
As reported at 10:12 am (JST) in Tokyo, the USD/CAD was trading at C$1.25, down 0.20%; on Thursday, the pair ranged from C$1.24510 to C$1.2487. The EUR/CAD is also lower at C$1.4835, down 0.26%.
BOC Outlook Improves for Rate Hike
Ahead of the GDP data, markets were forecasting only a 20% chance of a rate hike, but the latest data points raised those forecasts to 37% for a September rate increase. That probability increases to 90% at the October policy meeting. The Canadian Dollar is also receiving some support from the rebound in crude oil prices in the wake of Tropical Storm Harvey which devastated a large swath of Texas and knocked out nearly 25% of refinery capacity.