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USD lower across G10 despite beating GDP expectations

Posted on: June 29, 2017

Hawkish Central Bankers continue to dominate the currency headlines, with the Bank of Canada, Bank of England and the European Central Bank all talking less stimulus and higher rates.

Starting on the home front, the odds of a July rate hike are now over a whopping 70%; however, there are still two key hurdles to go before the July 12th meeting, with Canadian GDP tomorrow and employment numbers next Friday. In his panel discussion yesterday, Poloz continued to touch on the key notes of the oil shock being largely in the rear view mirror and strong domestic data. Deputy Governor Patterson also towed the party line in a speech in Calgary and the debate between a July hike versus a fall hike continues to heat up. Technically, the 1.2970/1.3000 channel will be strong support with resistance starting to fill in around 1.3130. This morning, US GDP for Q1 came in above expectations (1.4% vs 1.2% expected) and personal consumption also beat expectations (1.1% vs 0.6% expected), while jobless claims saw a slight miss.

Across the pond at the Bank of England, Mark Carney has turned on a dime and is now reading the same tea leaves as Haldane. When he suggested that removing some stimulus may be necessary, GBPUSD quickly bounced back to pre-election levels and may take another peak at 1.3000. Despite the ECBs pleas that Draghi’s comments weren’t intended as hawkish, the market interpreted them as such, with the Euro gaining ground and breaking above 1.1400. Draghi’s comments have also trickled into the global bond market, incrementally pushing up yields.

Market Risk seems to be stable on the back of all of the positive news. US bulge bracket banks have successfully passed the second round of stress tests and the concerns over US subprime auto loans have been abated. WTI rose for the 5th consecutive session following the US crude inventory report despite a build in stockpiles. Markets appear to be changing their dynamic as we are now seeing growth convergence and policy normalization.

  • Yesterday’s NA Range 1.3013 – 1.3117
  • Asia 1.3020 – 1.3042
  • London 1.3006 – 1.3044

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