Forex: Canadian Loonie gains versus US Dollar following BOC rate increase to 1.00%

The Canadian dollar has advanced against the US dollar today in forex market trading following the interest rate increase by the Bank of Canada (BOC). The BOC raised its benchmark interest rate by 25 basis points earlier today to 1.00 percent from 0.75 percent as widely expected by market forecasts. This follows the July interest rate increase by 25 basis points as the BOC moves to bring the rate to normal levels after a prolonged period of ultralow rates following the financial crisis .

The Canadian currency has been charging higher against the other major currencies today on the news as the loonie has made gains against the euro, Japanese yen, Australian dollar, New Zealand dollar and the British pound.

The bank statement accompanying the rate decision said that the Canadian economy was “slightly softer in the second quarter than the Bank had expected, although consumption and investment have evolved largely as anticipated. Going forward, consumption growth is expected to remain solid and business investment to rise strongly.”

The statement also said that Canadian economic recovery may not come as quickly as previously expected as the bank sees a “weaker profile” in economic activity in the U.S. , a major export destination for Canadian goods.

Other Canadian news releases today showed that Canadian building permits fell by 3.3 percent in the month of July following a 6.9 percent increase in June, according to Statistics Canada. Market forecasts were expecting building permits to fall by 4.9 percent. The Ivey purchasing managers index was also released today and showed an increase to 65.9 for the month of August. This follows a score of 54.0 in July and surpasses the market forecasts looking for a 55.5 score for the month.

Forex chart: USD/CAD Hourly –

The US Dollar falling against the Canadian dollar today in forex trading following the bank to Canada’s interest rate increase to 1.00 percent. The USD/CAD pair is trading lower after increasing yesterday and fell through the 50-hour moving average in purple, looking to test the recent support level near 1.0330.