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Bank of Canada puts brakes on CAD rally

Posted on: September 19, 2017

CAD had its worst day against the USD since January yesterday, as comments from Bank of Canada Deputy Governor Tim Lane caused USDCAD to pop higher and run the stops above 1.2300 before fading a bit. Lane stated that the BoC will be closely watching the impact of rising interest rates and the strength of the Canadian Dollar on the economy. Now, this may sound like an eloquent summary of their job description but we believe it is also a statement to the market that an October rate hike is not quite as likely as some were pricing in. The probability for October has grinded back below 40% compared to >50% at the end of last week, while December remains almost fully priced in.

An uneventful overnight session has continued into North American hours with the market still digesting Lane’s speech from yesterday. On the data front, Canadian Manufacturing numbers came in worse than expected while US Housing Starts and Building Permits came in better than expected. The big events are still to come this week, with the September Fed announcement tomorrow and Canadian CPI and Retail Sales on Friday. The market will be looking for any changes to the 2018 Fed Dot Plot and comments about the balance sheet unwind. Speaking of balance sheets, rumours of dissent amongst ECB members around the size and duration of the QE program and the impact of a stronger EUR on the economy is generating some noise this morning.

  • Yesterday's NA 1.2192 - 1.2338
  • Asia 1.2274 - 1.2309
  • London 1.2262 - 1.2307


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