Globe and Mail article has reported that in leaked documents, the US has lowered its demand that Canadian and Mexican made vehicles be at least 50% US content. This was a big stumbling block and appeared to be the make or break of the NAFTA process. The Canadian dollar reacted positively on this news, also, lower oil inventory numbers has caused oil prices to jump to their highest levels in six weeks. Prices gained as much as 2.6%, West Texas is now over $65 USD a barrel, traders were totally surprised to the dip.
The FOMC announcement comes out at 11:00 am, PST, markets have fully priced a 0.25% rate hike, analysts are looking to see if the FED wants four rate hikes instead of the original anticipated three. If the FED sticks with three, then the CAD will likely rally further.
USDCAD 1.2954, 1.2950, 1.2946 1.2981, 1.2995, 1.3005
USD-CAD declined for a third consecutive session, logging a four-session low at 1.3010. The move reflected gains in the Canadian dollar on news of progress on the NAFTA front, with the U.S. dropping its contentious auto-content proposal. Former consolidation support at 1.3045-47 has now reverted as a resistance level. A $3-plus rebound in oil prices this week has also been a positive lead for the Loonie. Next data of note out of Canada will be January retail sales (Friday), seen rebounding 1.0% in January after the 0.8% drop in December, along with February CPI (also Friday), which we expect to rise 0.3% m/m and by 1.8% y/y.[EUR, USD]
EUR-USD has lifted to the upper 1.2200s after logging a three-week low yesterday at 1.2239, which capped a recent down move driven by a widening in the U.S. Treasury over Bund yield spread. The principal focus today is on the Fed policy announcement and SEP (Summary of Economic Projections) today. We are with the market median expectation in forecasting a 25 bp rate hike, to boost the funds band to 1.50% to 1.75%. We also expect the Committee to leave the dot plot medians at 3 hikes this year and next, though policymakers are likely to upgrade their forecasts on growth and lower their view on the unemployment rate. This could keep EUR-USD a sell-into-strength trade. Resistance is at 1.2319-20.