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  • richard evans

Will BoC move CAD towards six month lows?

Good morning

It was another quiet day in the currency markets yesterday, much of the movement we saw happened early in the morning which made it into yesterdays report. Weaker US factory orders numbers yesterday didn’t do anything to reverse the USD strength we’d seen, GBPUSD traded as low as 1.2530 but sat right on that 1.2560 area for much of the day while thoughts of ECB keeping rates on hold next week served to send EURUSD down to 1.0715, in turn pushing GBPEUR up to 1.1730, the highest level since 23rd August when you may remember a host of weaker PMIs out of EU and then UK sent the markets a bit haywire.

It was all reasonably quiet overnight as well, GBPUSD tried a brief break up towards 1.2600 but that didn’t last long and as I type we’re heading back towards that 1.2560 area, while EURUSD sits 1.0725.

AUD made back a little ground as Aussie GDP came out a touch stronger than expected. AUDUSD was around 0.6375 on release, after a bit of toing and froing it climbed briefly above 0.6400, now back to 0.6385. GBPAUD 1.9675 as I type.

Yen is a key talking point, having traded up to 147.80 overnight, still some way from the Oct 2022 highs and despite some attempts at verbal intervention from vice-FinMin Kanda there are still many who see 150.00 as a target. USDJPY did retreat back to 147.05 before pushing up again towards mid 147s. Kanda did mention that speculative trades were behind yen weakness, this might just make intervention more likely.

Elsewhere, USDCNY traded up above 7.3000, reaching 7.3245 but PBoC still managed a fix below 7.2000. Oil prices rose overnight, Brent traded above $90/barrel and WTI to $88.00, both reaching the highest levels since November. A continuation of the Saudi and Russian production cuts seems to be responsible.

BoC meets today for the rate announcement, no change is expected and any move otherwise would be a huge surprise. USDCAD trading right on this 1.3650 area that has capped the upside a few times since March. A dovish outlook from BoC could be enough to send CAD lower, but I think they would have to say something along the lines of ‘we’re not raising rates again’ for CAD to weaken significantly from these levels.

A decent calendar today, BoEs Bailey testifies to the Treasury Select Committee this afternoon, while much focus will be on the ISM PMI, specifically the employment index after last weeks jobs data. Aussie and China trade balances will be released overnight.

Looks like it will be another scorching hot day, BBC suggests it’ll reach 30° mid to late afternoon. If you have got this far you may notice that I used the ‘°’ symbol rather than writing ‘degrees’. After many years of using a PC I have only just discovered that pressing ‘Alt’ together with ‘0176’ brings up that symbol. I wonder how many short cuts there are that I just don’t know about.

Have a great day

- 09.30 UK construction PMI

- 10.00 EU retail sales

- 14.15 BoEs Bailey speaks

- 14.45 US S&P composite PMI

- 15.00 US services ISM

- 15.00 BoC rate announcement

- 19.00 US Fed beige book

- 02.30 AUS trade balance

- 04.00 China trade balance

- 04.10 RBAs Lowe speaks

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