Bank of Canada Governor Poloz is giving a speech at 12:15 pm (lunchtime), in Victoria, today. Markets are awaiting to see if he will give any inclination as to where interest rates are going, especially since the next rate meeting is July 11th. A month ago, it was very likely there would be a hike, however, with the recent turmoil with Washington it is now a 50/50 proposition. The BoC normally doesn’t like to give anything away this far in advance, but these are difficult times.
The USDCAD is unchanged and will stay that till 12:15 pm PST, expect a narrow range.
USDCAD 1.3280, 1.3266, 1.3260 1.3308, 1.3320, 1.3328
USDCAD has settled lower after surging on Friday following the release of much weaker than expected retail sales and cooler than anticipated CPI data out of Canada. Friday’s 4%-plus surge in oil prices help generate some demand-from-lows for the Canadian dollar. USDCAD posted a one-year high of 1.3384 and has subsequently settled near 1.3000. Support comes in at 1.3227-30. In Canada this week, BoC events dominate the docket this week, including a speech by Governor Poloz (Wednesday), which will be the final outing for a BoC official ahead of the July 11 rate announcement. An economy running near potential, 2% CPI and a 40-year low jobless rate are consistent with the Bank delivering on the signals from the May announcement and progress report that pointed to a rate hike. But recent data has undershot expectations. We still expect a 25bp hike next month, though with a weakened conviction. Another rate hike is pencilled in this year (we expect October) but uncertainty over NAFTA further clouds the policy outlook past July. Overall, we retain a bullish view of USDCAD.
EUR-USD corrected from a 12-day high at 1.1721, which was seen during the pre-London session in Asia. The pair has ebbed to the mid 1.1600s, clocking a pull-back low of 1.1651 following steady declines during the London AM session. The move mostly reflects broad dollar gains, with the greenback posting gains versus the dollar bloc, sterling, Swiss franc and other currencies, while the euro has also come under broader pressure. A recovery in stocks and an associated abatement in trade protectionist anxieties has — for now — helped the dollar rebound some. President Trump’s top trade advisor Navarro yesterday attempted to reassure businesses and investors on trade, saying that the Trump administration just wants “free, fair, and reciprocal trade…the mission here is to defend our technology and IP.” This seemed to help both stock markets and the dollar stabilize. EUR-USD has support at 1.1633-35.