Daily Afternoon Report 13.06.2017

 The Canadian dollar surged to fresh two-month highs against its U.S. counterpart on Tuesday, boosted by hawkish remarks by Bank of Canada Stephen Poloz.

The interest rates cuts undertaken by the central bank in 2015 have largely done their job as the economy appears to be gathering momentum, Poloz said on Tuesday.

“What that suggests to us is that the interest rate cuts we put in place in 2015 have largely done their work,” the head of the central bank said.

The remarks came a day after a senior policymaker at the central bank that it would assess whether low interest rates would still be needed as the economy continues to grow.

The remarks were seen as boosting the chances of a rate hike before then end of the year.

Meanwhile, the greenback was lower against a currency basket ahead of the start of the Federal Reserve’s two day policy meeting later Tuesday, where the central bank is widely expected to deliver its second rate hike so far this year.

With a rate hike largely priced in investors will be watching for indications on the pace of further tightening in the second half of the year and further details on the Fed’s plans for reducing its balance sheet.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, eased 0.13% to 97.02, holding below Friday’s two-week highs of 97.47.

Data in the U.S. on Tuesday showed that producer prices were flat in May as energy costs fell, indicating that inflation pressures may be easing.