Overnight the US Federal Reserve as widely expected raised interest rates which provided strength for the Canadian dollar as investors feel that a higher interest rate in the US will help the Canadian economy. The Federal Reserve interest rates is now one of the highest out of the G10 currencies and the press conference after hinted that gradual interest rate hikes throughout 2018 are likely.
The Canadian dollar straightened overnight however the pound has been making inroads against the Canadian dollar this morning. Today UK Prime minister Theresa May is set to fly to Brussels to offer the EU summit exactly what the UK is prepared to do and pay in a bid to start stage 2 trade negotiations.
Michel Barnier last week announced that he is happy for stage negotiations to begin however It is at the EU summit today where all should be confirmed. If it’s the case that EU officials confirm that stage 2 negotiations will begin and the UK and EU are in a healthy position I expect the pound to continue to rally against the Canadian dollar.
In other news the Bank of England are set to release their latest interest rate decision today. With inflation continuing to rise and now above 3% (Bank of England’s target is 2%), it will be interesting to hear the views of the Bank of England. There is no chance that the BoE will raise rates today however any hint that a hike could occur next year a further rally for sterling is on the cards.
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