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By xemarketanalysis April 18, 2018 3:00 pm
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    XE Market Analysis: Bank of Canada Keeps Rates on Hold

    OVERVIEW

    • Market sentiment remains positive on headlines that US officials met with North Korean leadership.
    • Canadian Dollar falls after BoC Governor is cautious on rate outlook. 
    • GBP slides after inflation cools. 
    • EUR mixed, inflation revised down.
    • Turkish Lira outperforming after the president announces the early election.

    HIGHLIGHT

    UK inflation unexpectedly cooled to 2.5% last month, its lowest level in a year from 2.7% in February, raising some doubts over whether the BoE will raise rates next month. Underlying inflationary pressures also eased, helped by Sterling’s recovery against the Dollar.

    US DOLLAR

    The US Dollar is effectively flat on the session, though the positive risk environment reports that senior US administration officials, including the nominated US Secretary of State, held direct talks with the North Korean leadership that has boosted hopes of a significant and lasting de-escalation of Kim's nuclear ambitions and threats. This is boosting equity markets and the Dollar versus the Japanese Yen, though there's little to suggest the broader Dollar weakness trend is changing. 

    BRITISH POUND

    The Pound fell sharply in the early European session after inflation cooled more than expected last month, but has recovered some ground (see highlight). 

    EURO

    The Canadian Dollar slid over 0.5% after the Bank of Canada kept interest rates on hold, and Governor Polloz said the central bank was uncertain about how many and at what pace interest rate hikes will be needed. He struck a cautious, but upbeat tone over the outlook for the economy, saying "considerable progress has been seen in the economy over the last 12 months, but it is not yet able to remain at full capacity on its own”. Market expectations for rate hikes have eased following the BoC's meeting, and the Canadian Dollar will remain vulnerable to these expectations over the coming days.

    CANADIAN DOLLAR

    The Canadian Dollar slid over 0.5% after the Bank of Canada kept interest rates on hold, and Governor Polloz said the central bank was uncertain about how many and at what pace interest rate hikes will be needed. He struck a cautious, but upbeat tone over the outlook for the economy, saying "considerable progress has been seen in the economy over the last 12 months, but it is not yet able to remain at full capacity on its own”. Market expectations for rate hikes have eased following the BoC's meeting, and the Canadian Dollar will remain vulnerable to these expectations over the coming days.

    AUSTRALIAN DOLLAR

    The Australian Dollar is firmer on the back of the improved mood in markets that are seeing demand for commodity-linked currencies increase. Investors are awaiting monthly jobs figures overnight which are forecast to show a solid increase of 21,000 in March and a dip in the unemployment rate to 5.5%.

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