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The Bank of Canada announced on Wednesday that it would maintain interest rates at 5%, to the surprise of no one. During a press conference in Ottawa, Governor Tiff Macklem said he wanted “to be convinced we’re on a path back to two percent inflation” before discussing lowering interest rates. The wording of the announcement emboldened CAD bears, pushing the Canadian Dollar down half a percent against its US counterpart, many in the camp that future rate hikes are now firmly off the table.
The following day, the European Central Bank announced its decision regarding its own currency, confirming that interest rates for the Euro will remain unchanged for the foreseeable future. ECB president Christine Lagarde cited unmet inflation targets as the main driver behind the decision, which led to a minor 0.35% drop in the Euro against the Greenback. Speaking of Lagarde, a recent survey of ECB staffers revealed that the majority of respondents didn’t want her as leader, a major point of dissatisfaction being that the president spends “too much time on topics unrelated to monetary policy”.
We finally have some movement in the oil markets this week, after an inventory report revealed on Thursday that crude withdrawals were significantly higher than market expectations. Fresh escalations in the Red Sea also added fuel to the fire, as Houthi pirates once again targeted vessels in the Gulf of Aden. The combined news pushed Brent Crude up to $82 a barrel on Thursday, WTI now up to $77.
The cherry on top came in the form of China announcing on Wednesday that it will cut the bank reserve ratio in an effort to inject some much-needed liquidity into its banking system. The move is intended to shore up the fragile recovery China is currently undergoing, as well as put the brakes on plunging stock prices. The effect on the latter was immediate, prompting the Hang Seng to surge over the last couple of sessions, in the first show of strength for the index we’ve seen in months.
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