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Daily Market Commentary

This morning's news is dominated by the Bank of Canada's surprise to most cut in the Bank Rate. Responding to weaker than expected inflation rate and combining that with an outlook for lower inflation than previously forecast, the Bank of Canada moved its key rate down by 25 basis points to 4.25%.The strength of the Canadian dollar plus uncertainty surrounding market volatility contributed to the improvement in inflation while it appears that the Bank listened carefully to the howls of protest from a veritable gaggle of interested parties such as manufacturers and provincial premiers to do something about the currency.

 

It seemed to work as the Loonie shed an immediate full cent, trading at  $ 101.24 as I write. The yield curve steepened immediately in the wake of this move as well.

 

 There are a couple of big shoes to drop in the next week. First, we will see the latest employment news on Friday on both sides of the border. Next comes the FOMC meeting next Tuesday at which time the Fed will most likely drop rates too with the consensus at 25 beeps but a healthy minority calling for 50.

 

 Canadian bond prices are rallying on this news.

 

 



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