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22.01.2014 19:20

American focus : the Canadian dollar weakened on the statements of the Bank of Canada

The Canadian dollar fell against the U.S. dollar after the Bank of Canada left interest rates unchanged and said to increase the economic growth projections . Canada's central bank left its benchmark one-day interest rate unchanged , at 1% , stating that the importance of the downside risks to inflation increased. However , it raised its forecasts for GDP growth , expecting increased demand from the U.S. and a lower Canadian dollar will boost exports.

Monetary policy of the Bank of Canada aims to maintain inflation at around 2% . The Bank noted that inflation, which was weak , yet dropped below the target level . The central bank attributed the low rates in a severe economic downturn and competition among retailers .

The Bank of Canada said that the balance of risks to the economy is the same as in October , and the risks associated with imbalances in the housing market " has not changed substantially ."

According to the quarterly report of the Bank of Canada's monetary policy , the risks with regard to inflation expectations " broadly balanced " , with a certain degree of competition in the retail sector in Canada temporarily affect prices . It "does not necessarily provoke a response of monetary policy " , if inflation expectations do not change.

The statement said that the return of inflation to the target level of 2 % " will take about two years ," while the negative impact from the high competition among retailers is weakening, and excess capacity absorbed. Projections for basic and general inflation were lowered for most quarters until the end of 2015.

The Bank of Canada raised its forecast for GDP growth in Canada in 2013 to 1.8 % from 1.6% , and it is now believed that the GDP in the 4th quarter increased by 2.5% per annum , while in October it predicted growth 2.3%. The central bank also raised its forecast for GDP growth in 2014 to 2.5% from 2.3 %, but lowered its forecast for 2015 to 2.5% from 2.6% . Such forecasts for GDP growth suggests that the economy will return to full capacity over the next two years.

Pound rose sharply against the U.S. dollar , which helped data that showed that the unemployment rate fell to its lowest level in nearly five years , while approaching to the 7 percent threshold at which the Bank of England officials may begin to reconsider the amount of the asset purchase program . According to the report , the unemployment rate , as measured by the standards of the International Labour Organization , fell to 7.1 percent in the three months to November , compared with 7.4 per cent , which were recorded in the previous three-month period ( October) . Office for National Statistics said that according to the median forecast of economists unemployment was down to 7.3 percent . In addition, it was reported that in December, the number of applications for unemployment benefits fell by 24 thousand, which was much less than economists forecast - at 32.3 thousand Meanwhile, the report showed that the number of unemployed fell by 167,000 to 2.32 million in the three months to November compared with the previous three-month period . Add that it was the biggest decline since October 1997 and the second largest since records began this statistic in 1971.

Yen demonstrates mixed against the dollar, which has been associated with the decision the Bank of Japan to refrain from expanding the program of monetary stimulus . We also add that the Bank of Japan left unchanged targets expansion of the monetary base in the range of 60 trillion yen to 70 trillion yen ( $ 671 billion ) a year and confirmed forecast that core inflation in the 2015 fiscal year , which begins in April , will be on level of 1.9%. Fewer economists expect that the Central Bank will go to expand stimulus measures in 2014, as inflation accelerating. The dollar index fell , retreating from a two-week high on speculation that the Fed meeting on January 28-29, reduce the purchase of assets by $ 10 billion to $ 65 billion a month, and will continue to minimize the QE at the same pace in future meetings .

22.01.2014 18:20

European stocks close

Market Focus

  • US nonfarm payrolls rise more than expected in July
  • Canada’s merchandise trade deficit widens in June
  • Canada unemployment rate falls to lowest level since October 2008
  • Canada Ivey PMI falls less than expected in July
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