Invesco Canada blog

Insights, commentary and investing expertise

U.K. triggers Brexit with Article 50: What happens now?

The Brexit process started today, when British Prime Minister Theresa May formally notified the European Union (EU) of the U.K.’s intention to withdraw from the EU under Article 50 of the Lisbon Treaty.

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Third time’s a charm

The U.S. Federal Reserve (Fed) hiked its key interest rate by 0.25% today, to a range of 0.75%–1.00%, marking the third increase in the current cycle. Fixed income markets had essentially priced in the increase two weeks ago, when nearly every Fed speaker acknowledged that a March hike appeared to be warranted. The vote was not unanimous as Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, voted against the action, preferring to keep the target rate unchanged at this meeting.

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The future of ECB QE: Is the end in sight?

In recent months, consumer prices in the euro area have begun to align with the European Central Bank’s (ECB) inflation target of just under 2%.1 We expected January headline inflation to be around 1.8%, a far cry from the deflationary conditions that convinced the ECB to begin its asset purchase program (quantitative easing, or QE) in 2015 and then extend it in 2016. As we look forward to 2017 and beyond, we ask whether QE should extend beyond March 2018 or will the inflation hawks and external voices force the ECB to end it before the region is ready?

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Currency outlook: CAD overvalued and USD mixed

The Canadian dollar has appreciated against the U.S. dollar since the U.S. presidential election in November. Some of the strength has been due to the higher price of oil on the back of promised cuts by OPEC producers in late 2016. In addition, a recent string of positive employment reports in Canada has supported the currency. Bank of Canada Governor Poloz attempted to limit further appreciation by mentioning that a rate cut was still possible at its January meeting with limited success. We believe the Canadian dollar remains overvalued.

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Interest-rate outlook: Fed hikes on the horizon?

Yields on Canadian government bonds have hovered in a range this year as the global yield sell-off has paused. The yield curve remains in a steepening trend as the Bank of Canada has attempted to keep the possibility of a rate cut on the table, although a recent string of positive employment surprises has made that possibility less likely. Canadian government bond yields are likely to remain range-bound in the near term until more certainty emerges around global economic prospects.

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