The Fed's latest round of easing is shaving expectations that the Bank of Canada might soon raise its 1.00% overnight target rate. The overnight indexed swaps, considered the most accurate gauge of market expectations, on Friday was pricing in a 10% chance of a 25-basis point rate increase by the end of 2012. That's down from 14% yesterday. And January's chances are at 20%, from 26%. The Canadian dollar has been firming, in part because its central bank is seen as a hawk among world doves. But on Friday, the US dollar climbed 0.23% vs the Canadian unit, to C$0.9710. Sure, the Bank of Canada says the direction for its policy rate is up, not down, but what Thursday's Fed action tells us is that the rate isn't going anywhere any time soon.
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