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Bank of Canada kept rate unchanged

Posted on: January 18, 2017

USD sold off against most currency yesterday with Trump saying USD is too strong in an interview. It will be interesting to see if Trump keeps on pounding the table accusing China to being a currency manipulator. The general trend seems to be Trump will pound the table regardless of the issue. However, it’s too soon to say if his action will follows any of his rhetoric.

The general USD weakness saw many people stopping out of their USD long position. This was led by the GBPUSD as pound shorts aggressively bought back their decision with Teresa May announcing the details on Brexit. GBPUSD jumped 3% for the day, the biggest gain in a long time.

Bank of Canada kept rate unchanged this morning. The tone of the statement seems to be mildly dovish with concerns of “material consequences from any US protectionism” and “Canada economy has material excess capacity”. To me, that seems like Canada is more than comfortable with a weak currency to drive exports and improve the economy. The only concern against cutting rate is the housing bubble backdrop that is clearly on their mind with the recent increase to mortgage insurance. With BOC out of the rate, the market now waits for the ECB rate decision tomorrow. The consensus is rates and QE will be unchanged. There’s definitely more upside risk on the EUR than downside as I think there’s still a lot of short EUR position outstanding. Beware of any comment of tapering in the statement.

  • Previous Day’s NA Range 1.3032 - 1.3078
  • Asia overnight range 1.3040 – 1.3078
  • London overnight range 1.3049 - 1.3120

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