Loonie jumped to its strongest level in two years

On Wednesday, the Loonie surged to 1.2134 against a weaker US Dollar, its highest level since mid-June 2015, after the Bank of Canada (BoC) surprised the markets by raising rates although many investors had expected the bank would wait until October. BoC announced its second interest rate hike since July 2017, moving its benchmark rate up to 1% from 0.75%, putting Canada ahead of the curve in returning borrowing costs to more normal levels after they were slashed due to the 2007-2009 financial crisis.

Yesterday, the Euro held firm ahead of a European Central Bank (ECB) policy decision, with the focus on what the ECB might say about the currency’s recent strength and how that may influence the policy outlook. ECB President Mario Draghi is set to start laying the groundwork for stimulus reduction at today’s meeting, but will probably hold off on any major commitment. According to Thomson Reuters, only 15 of 66 economists expect the ECB to announce a reduction of its monthly asset purchases at today’s ECB policy meeting, a sharp reversal from a month ago when slightly over half of respondents expected such a move.

Meanwhile, China’s Yuan extended its blistering rally against the faltering US Dollar fter the Central Bank raised its official guidance rate for the ninth straight session. The Chinese currency has strengthened more than 2,000 pips since the beginning of the August, taking its gain to 6.5% so far this year, but its upward momentum has appeared to slow slightly this week. Additionally, prior to the market opening on Thursday, the People’s Bank of China lifted its official Yuan midpoint for the ninth trading day in a row to 6.5269 per Dollar, the strongest since May 18, 2016.