For decades, the Bank of Canada has used the interest rate as a strong driver towards attaining its policy objectives. The three of Its core monetary policy goals are maximum employment, Price Stability, and Moderate long-term interest rates.
Last month, the Bank of Canada signaled that it could hike its interest rates as soon as April 2022. In its deliberation, due to high energy prices and supply chain bottlenecks, they speculated that inflation would stay above 4.8% target in the long-term next year and then ease to 2.1% in the fourth quarter of 2022. In response to the hawkish statement, the Canadian Dollar gained higher at 0.4% against the US Dollar(greenback).
Citing Canada’s robust economic growth, massive employment gains and high vaccination rates, it said that it was ending its bond-buying program after keeping its rates unchanged.
However, one of the biggest threats that could disrupt the upward growth pattern and tapering is the Omicron Covid-19 variant. Few days ago, more than 15 cases of the variant and severe trends of illness were discovered across the country. In response to that, the federal government has supported the national advisory board on immunizations recommending all adults above 50 years of age to receive a vaccine booster shot. This viral trend is hitting hard in the transportation sector as it expanded its ban on travelers from some countries like South Africa.
Currently, its job market recovers past the forecast quadrupling in gains and its unemployment rate fell to 6 percent, near the pre-pandemic levels and its GDP is projected to trend higher at the end of 2021.
Across-board, Lower Overnight Rate will provide a boost to the broader economy by improving cash flow, encouraging spending and investment, which will increase economic activities and boost employment.
Regardless, traders should brace themselves up for a period of high volatility as the Overnight Rate report often has a great impact on the FOREX market. An increase in Overnight Rate will usually strengthen the Canadian Dollar (CAD), while its decrease will usually weaken the Canadian Dollar (CAD)
Traders should always be aware that volatile markets provide great opportunities for making profits, as the increase in volatility can cause market swings for traders to capitalize on.
The currency pairs that include the Canadian dollar, are mostly affected by the data release. They include: USDCAD, GBPCAD, EURCAD, CADJPY, CADCHF, AUDCAD, NZDCAD etc.
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Time Schedule for the Canadian Overnight Rate release:
Date: Wednesday December 8th, 2021.
Time: 4:00 pm (GM + 1)
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