World stock markets rallied on Monday and the U.S. dollar hit a two-month high against the yen as the latest U.S. jobs data gave investors greater confidence in the strength of the economy.
Focus was already turning to Federal Reserve chief Janet Yellen’s semi-annual testimony on monetary policy and a meeting of Canada’s central bank on Wednesday for the latest policy signals from the world’s major central banks.
For now, unease about an end to an era of ultra-cheap money gave way to optimism about the global growth outlook, with Friday’s stronger-than-expected U.S. non-farm payrolls report helping to bolster risk appetite. Data on Monday showed exports from Germany, Europe’s biggest economy, rose more strongly than expected in May.
Over the past two weeks, markets have reassessed the outlook for tighter monetary policies from major central banks following a string of hawkish remarks.
“We’ll see just how much substance there is to these comments on Wednesday, when the Bank of Canada announces its latest decision, with investors now expecting a 25 basis point increase,” said Craig Erlam, senior market analyst at OANDA.
A rate rise from Canada’s central would be its first interest rate rise in nearly seven years.