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Loonie Spikes To 5-Month Highs After Poloz, Patterson Double-Whammy

Following Bank of Canada's Poloz restates his bias for higher rates earlier in Sintra, now BoC deputy Patterson confirmed "the oil shock is largely behind us" and hinted that low rates were no longer needed. This is the biggest spike in the Loonie since March 2016, pushing it back to its strongest against the dollar since early Feb 2017.

In a speech on how policy makers gather intelligence to augment its analysis, Bank of Canada Deputy Governor Lynn Patterson outlined how the central bank’s “contacts” in the oil sector helped shape its decision to cut interest rates twice in 2015.

“That knowledge fed into our judgment and, ultimately, our decision to lower our policy rate in January and July 2015,” Patterson said in Calgary, according to prepared remarks. 

 

“Two years later, it is our view that these cuts have helped facilitate the economy’s adjustment to the oil price shock and that the economic drag from lower prices is largely behind us.”

The comments echo similar language by Governor Stephen Poloz, and are consistent with the central bank’s recent adoption of a tightening bias that has made the Canadian dollar the best performing Group of 10 currency this month.

Poloz restating his bias towards higher rates sent CAD surging most since March 15th to its strongest since Feb 2017... 

"The Poloz comments buttress the change in tone that we’ve seen from the Bank over the past month,” said Bipan Rai, Toronto-based senior foreign-exchange and macro strategist at Canadian Imperial Bank of Commerce. “There’s still some speculative shorts out there are being squeezed as a result.”

The result...

 

Pushing CAD to its highest since Feb against the dollar...