Loonie Looking to BoC for Direction

The Bank of Canada announced a change in policy direction in a speech by Deputy Governor Carolyn Wilkins on June 12.  Since then, economists and analysts have been revising their Canadian interest rate outlooks. The Bank of Canada is almost universally expected to announce a 0.25 percent rise in its overnight rate this morning at 10:00 am (EDT).  That won’t be news.  The news will come in the policy statement, or Monetary Policy Report or even during Governor Polo’s press conference.  A more hawkish than expected outlook will lead to fresh USDCAD losses.

The Bank of Canada is not the only game in town, today.  Federal Reserve chair Janet Yellen testifies before Congress.  The US dollar has been on the defensive in the run-up to today’s testimony.

Overnight, the US dollar kept to narrow ranges against the major currencies and started the Toronto session on the defensive.

EURUSD opened in New York close to where it closed which was well-below the overnight peak. EURUSD inched higher in Asia, rising from 1.1463 to 1.1488 and then retraced the move in Europe. 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. Higher than expected Eurozone Industrial Production data gave added support.

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%)

USDJPY dropped from 113.95 to 113.32, as it was caught up in Trump Jr’s email kerfuffle. The move appears overdone as finding dirt on Hillary Clinton would be as easy as finding a liar in Washington.

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 opened at $45.78/b.

Overnight ranges for major currency pairs

Close Open High Low
11-Jul-17 12-Jul-17
EURUSD 1.1463 1.1454 1.1488 1.1443
USDJPY 113.83 113.43 113.95 113.32
GBPUSD 1.2846 1.2857 1.2868 1.2813
USDCHF 0.9639 0.9632 0.9643 0.9620
AUDUSD 0.7632 0.7650 0.7662 0.7636
NZDUSD 0.7225 0.7236 0.7241 0.7218
USDCAD 1.2924 1.2928 1.2928 1.2896
GOLD 1210.54 1218.76 1220.36 1216.86
WTI 44.44 44.15 44.88 44.05

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