US FED Stands Firm on Rate Hike Timeline. Canadian Dollar Negative.
The US FED came out today and indicated they are holding the line on their rate hike timetable for the second half of the year. Essentially, the FED indicated they are happy with the way the US economy is growing, job growth is on track, and while inflation is not a threat currently, it is a medium term concern. Therefore, if the status quo US economic growth projections fall in line, expect a rate hike with certainty.
This is another slap to the Canadian dollar, which just finished taking a beating from the Bank of Canada and falling oil prices. This is negative news for the loonie because the interest rate differential outlook between Canada (BOC) and the US (FED) will eventually be reduced – it is simply a matter of time.
The FED is leaning towards rate hike mode, while the BOC is in a rate cut mode. The US economy is on solid ground, while Canada has uncertainty due to falling oil prices. It is a tale of two worlds.
It is also important to note the FED made no special emphasis to global economic woes, other central bank moves, or a strong US dollar’s impact on the US.
Essentially, the FED said if the US economy is doing well, expect a rate hike soon.
Look for USD/CAD to break 1.25 in the short term and could reach 1.30 if oil prices fall further. The trend is the friend for the US dollar. The next few months could get ugly for the loonie.
By Admin | January 28, 2015 | Daily Update |
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