Market Spotlight: BOC Announces Largest Rate Hike in 24 Years

BOC Raises Rates 1%The Bankof Canada took markets by surprise yesterday, announcing a full percentagepoint increase in interest rates. Taking its headline cash rate from 1.5% to2.5%, the BOC surpassed expectations for a .75% hike, marking the largest ratesincrease among G10 central banks over this current tightening cycle. Along withthe rate hike, which was the largest by the BOC in over 20 years, the bank alsosignalled the likelihood of further hikes to come."Exceptional Circumstances"Commenting on the move during the post-meeting press conference,BOC governor Macklem told reporters "We had indicated we wereprepared to be more forceful. Today was more forceful." Questioned overwhether the move was unusual for the bank, Macklem said "Yes, it is a veryunusual move to increase by 100 basis points at one decision and that reallyreflects the very unusual, exceptional circumstances that we find ourselvesin."Looking ahead and answering questions over-growth prospects inCanada, Macklem said "Our forecast is for soft landing. As I said, thepath to that soft landing has narrowed, and that is an important reason why wetook stronger action today to front-load policy interest rates."Technical ViewsEURCADDespite the move, CAD is weaker today, mostly due to lower oilprices. EURCAD failed to break lower yesterday and price is now moving higheroff the 1.3031 level. While this level holds as support, the focus is on a retestof the broken 1.3384 level next and the bear channel top, which should offerbears a better short entry.

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