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Muted Monday ahead of Central Bank activity

Posted on: June 12, 2017

It’s a relatively quiet morning on the desk in terms of data. Last week we witnessed Super Thursday and employment data from the BoC on Friday. This week we will have the FOMC and CPI/Retail sales on Wednesday, followed by the Bank of England on Thursday and Bank of Japan on Thursday/Friday.

Last week, USD/CAD experienced a period of strength after poor oil inventory data, breaking through the 1.35 mark; however, it has since stabilized to a range of 1.3430 – 1.3520. The pair is likely to see continued selling between the 1.3500 – 1.3530 strong point. CAD saw a brief boost from a massive gain of 54,000 jobs in May which blew past expectations. With improving employment numbers and economic sentiment, the BoC may be inclined to hiking rates in early 2018.

Going forward, market participants will focus on the FOMC rate decision. The probability of the FOMC hiking rates on Thursday is currently 90.6% priced in, and is incrementally higher till December 13. We will look to the minutes and Janet Yellen to determine where the dot plot will go for the rest of the year. The following press conference is likely to focus on balance sheet normalization with Janet Yellen discussing what was in the May minutes – three month caps and the desire to unwind both MBS and Treasury positions. At home, Canadian data will most likely be secondary with no major releases, with headliners including manufacturing sales (Thursday), home sales (Thursday), and national accounts (Wednesday). Home sales will probably be the most desired data point as everyone is keen to see what the impact of new housing regulation will have on the market (knowing that Toronto has slowed).

Oil is managing to hold above strong support at $45 ($46.41 at the time of this writing). U.S. drillers added eight rigs in the week to June 9, which brings the total to 741, the most since April 2015, according to Baker Hughes.

  • Friday’s NA Range: 1.3423 – 1.3515
  • Asia Overnight Range: 1.3438 – 1.3464
  • London Overnight Range: 1.3433 – 1.3464

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