Rates as of 0500 GMT

Market Recap

What do you have to do to get any respect around here? The Bank of Canada shocked markets Wednesday with a 100 bps hike, which almost no one had forseen. Next day, CAD is the weakest currency of the lot, with two standard deviation moves in several of the crosses.

CAD initially came off with oil prices USDCAD moved higher, but then failed to recover as oil recovered.

Similarly with CAD and risk sentiment, as proxied by the SP 500. The SP 500 was down 2.1 on the day at one point but recovered as thoughts of a 100 bps hike at the next FOMC meeting receeded see below.

I must admit Im mystified by the move, as were others, I suspect. I wasnt able to find any good explanation. Bank of Canada Gov. Macklem seemed surprised, too. In an interview with The Financial Post, he said, In terms of this decision, the fact that we havent seen as much appreciation of the Canadian dollar means weve got to do more through interest rates. That is something were taking into account.

On the flip side, the strength of USD was somewhat surprising too as the market reconsidered the odds of a 100 bps hike at this months Fed meeting. Whereas that was seen as the most likely response to the shocking June US consumer price index CPI, the market dialled back its expectations yesterday after two voting members of the Committee, Fed Gov. Waller and St. Louis Fed President Bullard, both advocated a 75 bps hike.

The US yield curve moved further into…