The British pound collapsed after the Bank of England raised the Bank Rate from 0.25% to 0.50%, the first increase in 10 years. It was considered a “dovish hike.” The vote was not unanimous (7-2) and the Bank expressed concern about Brexit uncertainties. Furthermore, inflation is expected to trend lower in the coming months as the inflationary impact of the post-Brexit vote Sterling collapse dissipates. GBPUSD had climbed from 1.3072 on October 27 to 1.3320 on November 1. In a textbook case of “buy the rumour, sell the fact, GBPUSD dropped from 1.3297 to 1.3095 when the BoE statement was released.
Yesterday afternoon, the Wall Street Journal reported that President Trump would nominate Jerome Powell for Chair of the Federal Reserve today, at 3:00 pm EDT today.Asia traders reacted by selling US dollars.USDJPY dropped from 114.20 to 113.74, and EURUSD rallied from 1.1614 to 1.1670.
Jerome Powell is thought to hold similar monetary policy views as Janet Yellen. He is viewed as the most dovish of the candidates being considered.
Still, it is not a done deal. Trump likes nothing better than to screw around with the media. What if the Powell for Fed Chair is “Fake News.”
In Japan, the USDJPY decline on the Powell story wasn’t sustained. USDJPY recouped most of the losses by the New York open.
Better than expected Australia Trade and Building Permits data lifted AUDUSD from 0.7674 to 0.7724. NZDUSD rallied in concert, supported by broad US dollar weakness.
EURUSD retreated from it’s “Powell story peak”: and opened in New York close to the middle of this week’s range. Traders ignored decent Eurozone Manufacturing PMI and German employment data.
Oil prices are steady after falling from the 2017 peak of $55.17 yesterday.
USDCAD is locked in a 1.2770-1.2915 range, albeit with a bullish bias. Prices declined overnight fueled by broad US dollar weakness. Firm oil prices have slowed USDCAD gains on diverging Canada and US interest rate outlooks.
USDCAD Technical outlook:
The intraday USDCAD technicals are bullish while prices are above 1.2820 looking for a break above 1.2915 to extend gains toward 1.3000. A break below 1.2820 will llead to a retest of support at 1.2740 which if broken will extend losses to 1.2630. It would also imply that a short term top is in place at 1.2815. For today, USDCAD support is at 1.2820 and 1.2770. Resistance is at 1.2880 and 1.2915.
Today’s Range 1.2820-1.2920
Chart: USDCAD daily