Going into this week, the European Central Bank (ECB) meeting was the major event markets were watching. It did not disappoint, but much of its thunder was stolen by the Bank of Canada's (BoC) decision a day earlier.

Starting with the Canadian central bank on Wednesday, we saw a 25 basis point increase in its benchmark interest rate to 1.00%. For those keeping score at home, that brings the BoC back 25 basis points lower than the U.S. Fed Funds target. The hike was not as much of a surprise as the timing was. There is a lot of Canadian economic data coming out in front of the October BoC meeting and markets expected Governor Stephen Poloz to wait for that data to print before continuing its hiking spree.

The decision also underscores the output gap structure of the Bank of Canada's policy strategy. It seems so confident that GDP growth will take up any slack in the economy that it is willing to risk such a move while still partially in the dark about the latest economic data.

For us on the FX desk, the big news is that the Canadian dollar is at its strongest level in two years with what looks like more room to get even stronger.

CAD chart

Across the Atlantic, the ECB had its closely watched meeting on Thursday. ECB President Mario Draghi delivered the usual central bank comments about watching the exchange rate, but if he and his colleagues were really concerned about the strength of the euro, they know how to put a stop to it –more severe warnings. The euro actually spiked higher going into the decision but came off a bit after the post-meeting press conference.

EUR chart_090717 642px wide

The real drama surrounding the ECB these days is when it will release more details about winding down its quantitative easing program. This strongly looks like it will be at an October meeting.

The bottom line for both central banks is that they are acting in a manner that exudes a pretty darn decent amount of confidence – almost to the point of arrogance to some people.

My View: Both banks are riding a wave of success and growth this year, so why change the narrative? We will see if they continue with this winning streak as we go into the fall.

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