A very bright spotlight is shining on the Bank of Canada. Today is the day that they announce the first overnight rate increase since June 2010. At least that is what 90% of forecasters believe. In addition, the quarterly Monetary Policy report will be released. It is that report which will create the excitement.
Traders and analysts will scrutinize every paragraph hoping to discern the number and frequency of future rate hikes. After today, many economists have penciled in two more increases by the first quarter of 2018.
Mr. Poloz may give some clarity during his press conference that is scheduled for 8:15 PDT.
The pending events have led to USDCAD trading rather erratically this morning, bouncing in a 1.2900-40 range.
The Bank of Canada wasn’t much of the story overnight. Traders in Asia and Europe were focused on Donald Trump Jr’s emails with a former Russian business partner of his dad. They were also far more concerned with Fed Chair Janet Yellen’s testimony to congress this morning.
EURUSD inched higher in Asia, rising from 1.1463 to 1.1488 and then retraced the move in Europe. New York traders extended the losses to 1.1416. Traders are looking past comments from various ECB officials in the past few days to downplay the onset of QE tapering while downgrading US rate hike expectations.
USDJPY dropped from 113.95 to 112.93 in early New York trading, as it was caught up in Trump Jr’s email kerfuffle.
Sterling traded in a narrow band in Asian and then dropped from 1.2854 to 1.2813 in early Europe. Trading. The move was erased when the UK posted a 43 year low in the unemployment rate (Actual 4.5%) and GBPUSD is sitting at 1.2882.
Oil prices soared in early Asia trading after the American petroleum Institute announced an 8.13 million barrel drop in crude inventories. WTI rose from $44.92 to $45.99 and are now at $46.02/b
AUDUSD and NZDUSD inched higher, albeit in narrow ranges, supported by the broad dollar weakness. Aussie got added support from a rise in Australia Consumer Confidence.
USDCAD Technical outlook:
The USDCAD technicals are bearish looking for further losses to 1.2770 and then 1.2500. Only a move above 1.3250 would negate the downside pressure. For today, USDCAD support is at 1.2880 and 1.2860. Resistance is at 1.2930, and 1.2960
Today’s Range 1.2870-1.2950
Chart: USDCAD 4 hour