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Canadian housing starts beats expectations

Posted on: July 11, 2017

The USD is stronger once again against most of the G10 in another quiet overnight session, ahead of the meatier events and data prints later this week. We saw a quick pop in the EUR this morning as Merkel was on the tapes saying that ECB policy is not where they want it to be but has since reversed its gains.

On the data front Canadian Housing Starts came in stronger than expected while US Small Business Optimism came in below expectations.

Barring a significant oil move I would expect the 1.2850 -1.3010 range to hold until the Bank of Canada tomorrow morning. With a 25 bp hike essentially fully priced in, bringing the overnight rate to 0.75%, the language will be the key. If the BoC refers to the output gap closing quicker than previously forecast we could see the market quick to price in an additional fall hike to erase the two oil shock rate cuts back in 2015. Less urgency or an even no hike could cause USDCAD to snap back higher. Growth in Canada during the past 3 quarters has been the strongest out of the G7 again; however, wage growth is currently near a multi-decade low. Many are calling for the impact of rate hikes to be more severe than prior periods, given the growth in consumer leverage and real estate activity.

USDJPY 114.268 has been succumbing to the pain of rate differentials. Current and near-term monetary policy is largely expected to remain lose, while the Fed and other global central banks are keen on changing their bias towards a tighter policy. The market believes that the BoJ will be the only G10 not starting a rate normalization process by next year.

  • Yesterday's NA 1.2871 - 1.2923
  • Asia 1.2885 - 1.2906
  • London 1.2885 - 1.2926


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