Investment Clock insights

The Bank of Canada hikes rates for the first time since 2010

Hiroki Hashimoto

13 July 2017

Yesterday, the Bank of Canada raised its interest rate to 0.75% from 0.50% for the first time since 2010, becoming the second central bank in the developed economy to hike in the current cycle. Some market commentaries suggested that the European Central Bank was the initiator of the seemingly coordinated hawkish speeches coming from non-US central banks at the end of June, however this arguably started two weeks earlier with the Bank of Canada when their deputy governor Wilkins signalled the shift in policy, hinting a rate hike. The Canadian dollar, one of our favoured currencies in the multi asset funds we manage, strengthened on the back of the announcement today of a one year high.

Against this backdrop, the Bank of Japan is maintaining its stance as a firm non-hiker of monetary policy. We expect such monetary policy divergence to continue which should help weaken yen to benefit Japan. We remain overweight Japanese equities, currency hedged where possible.

Chart: Canadian dollar strengthens after the announcement

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.