The Bank of England raised its bank rate from 0.50% to 0.75% in a 9-0 vote. The result was largely expected, but GBPUSD still rallied, climbing from 1.3070 to 1.3125. They left their QE program intact. The BoE statement said that MPC continues to recognize that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal.” After a delayed reaction. President Trump’s threat of 25% tariffs on Chinese imports yesterday, led to risk aversion trades today. Asia equity markets sank and took European bourses with them. Wall Street is poised for a flat to slightly negative opening.The tariff threat isn’t the only reason equity indices are lower. The Federal Open Market Committee (FOMC) statement was a tad hawkish and leaves the door open for two more rate hikes in 2018.
EURUSD broke support in the 1.1655-60 zone in Asia and traded lower ever since. Risk aversion from falling equity markets, US sanctions of a couple of Turkish officials, China/US trade threats undermined the single currency. The intraday technicals are bearish while prices are below 1.1640, looking for a break of 1.1570 to extend losses to 1.1510.
The shift into risk aversion trades drove USDJPY from 111.72 to 111.44 in New York, this morning. A move below 111.40 would trigger stop-loss selling and target 110.70.
AUDUSD and NZDUSD sank under the weight of the hawkish FOMC statement. AUDUSD traders ignored a better than expected Trade surplus which was almost double the forecasts. (Actual AUD$ 1.873 million vs forecast AUD $900 m)
The rising US dollar and yesterday’s EIA report of another weekly increase in crude oil inventories drove WTI oil prices from $68.08/barrel yesterday to $$67.01 this morning, in New York.
USDCAD rallied in concert with the broad US dollar gains. Media reports saying Canada is being snubbed by Nafta negotiators, in part because of the Trump/Trudeau feud, played a role. The US and Mexico are reportedly close to a deal on auto content, and Canada is not even at the table.
There aren’t any Canadian data today. The US data includes Initial Jobless Claims, ISM NY index and factory orders.
USDCAD Technical Outlook
USDCAD has been bouncing inside a 1.2980-1.3090 range for the past week and is just below the middle of that range this morning. A break above the 1.3040-60 area will lead to a test of 1.3090-1.3105, while a move below the 1.2980-90 area targets 1.2940-50.
Today’s Range 1.2990-1.3060