We’ve briefly touched on a few of the “animal characters” you will encounter during your trading career. Bears, bulls, gorillas, snakes and wolves. Here’s a bit on Hawks.
Hawks carefully monitor and control economic inflation through interest-rate adjustments and monetary-policy controls. In general, hawkish investors prefer higher interest rates in order to maintain reduced inflation.
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
The global economy has unfolded broadly as the Bank projected in its October Monetary Policy Report (MPR). The economic expansion in the United States is progressing at a gradual pace and is being held back by uncertainty related to the fiscal cliff. Europe remains in recession. Chinese growth appears to be stabilizing. Commodity prices have remained at elevated levels since the October MPR and global inflationary pressures are subdued in response to persistent excess capacity. Global financial conditions remain stimulative, though vulnerable to major shocks from the U.S. or Europe.
In Canada, economic activity in the third quarter was weak, owing in part to transitory disruptions in the energy sector. Although underlying momentum appears slightly softer than previously anticipated, the pace of economic growth is expected to pick up through 2013. The expansion is expected to be driven mainly by growth in consumption and business investment, reflecting very stimulative domestic financial conditions.
This should bode well for long Canadian Dollar trades moving forward as a rise in interest rates is generally seen as good for the currency.