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“With market-implied odds for a 25-basis point move set around the 55 per cent mark, the Canadian dollar is trading near levels not seen since mid-2015,” Karl Schamotta of Cambridge Market Payments said in a commentary.
“We have advanced our call for an additional 25 [basis point] tightening in the Overnight Rate to this week … but it would be fair to say that some (quite significant) doubts about the timing of a rate tightening remain,” Scotiabank said in a foreign exchange commentary, adding that many uncertainties remain in the market, such as the situation with North Korea, Brexit, and the NAFTA trade talks.
“This is not a slam dunk by any means,” Mendes told CBC News’ Meegan Read. “There’s very little difference in the bank adjusting rates either tomorrow or in October for the overall economy moving forward.”
“We think though, on balance, if the Bank of Canada is going to go in the next few months that tomorrow would be the easier route, given that they could then try to tamp down any further speculation of further rate hikes, and thereby cool down a little bit of the appreciation in the loonie,” he said.
The U.S. dollar was weaker Tuesday against major currencies, such as the euro and the Japanese yen, following some dovish comments regarding inflation pressures by a Federal Reserve governor, Lael Brainard.
Meanwile, stocks retreated sharply as investors weighed political developments on the Korean peninsula.