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BoC rate shocker sparks trading frenzy in USD/CAD, GBP/CAD

By Gregory Boyd


Updated

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In this article:
USD/CAD
USD/CAD
1.36077 USD
0.00137 +0.100%
GBP/CAD
GBP/CAD
1.67040 USD
0.00765 +0.460%
Oil - Crude
Crude Oil
72.14 USD
0.31 +0.430%
Natural Gas
Natural Gas
5.938 USD
0.008 +0.140%

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Illustration of a dollar symbol with a rocketry theme
The Bank of Canada (BoC) rate surprise fired up fast, significant moves in currency pairs

A Bank of Canada (BoC) rate hike surprise on Wednesday disrupted exchange rates and sent traders scrambling.

The BoC was widely expected to hike its trend-setting overnight rate by three-quarters of a percentage point, from 1.5% to 2.25%.

But the BoC rate hike was a surprising full percentage point, to 2.5%.

Forex pairs jumped in response.

CAD/USD price chart 

“Inflation in Canada is higher and more persistent than the Bank expected in its April Monetary Policy Report, and will likely remain around 8% in the next few months,” the central bank said in its announcement.

USD/JPY

135.85 Price
-0.670% 1D Chg, %
Long position overnight fee 0.0016%
Short position overnight fee -0.0041%
Overnight fee time 22:00 (UTC)
Spread 0.012

AUD/USD

0.68 Price
+0.240% 1D Chg, %
Long position overnight fee -0.0013%
Short position overnight fee 0.0001%
Overnight fee time 22:00 (UTC)
Spread 0.00006

GBP/JPY

166.75 Price
-0.320% 1D Chg, %
Long position overnight fee 0.0000%
Short position overnight fee -0.0001%
Overnight fee time 22:00 (UTC)
Spread 0.026

EUR/USD

1.06 Price
+0.060% 1D Chg, %
Long position overnight fee -0.0027%
Short position overnight fee 0.0008%
Overnight fee time 22:00 (UTC)
Spread 0.00006

 

In a commentary, the economics team at TD Bank said: “This big step up in rates is uncommon, so too is the economic backdrop. With the unemployment rate at 4.9%, wages running at 5.2%, and inflation at 7.7%, the pressure on the BoC has not let up.”

 

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GBP/CAD price chart

“To preserve these gains in the Canadian dollar, the prices of energy commodities like oil and natural gas must continue to grow,” Capital.com analyst Piero Cingari wrote in a survey of Forex news on Wednesday, which was dominated by new, ever-climbing data on inflation in the US.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

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