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CAD Weakens As BoC Lowers Growth Forecasts
January 19, 2010 5:25 PM CET
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G10 Advancers and Decliners vs USD |
| | GBP | 0.20 |  |  | NZD | -0.22 | | | AUD | -0.38 | | | JPY | -0.51 | | | CAD | -0.68 | | | DKK | -0.78 | | | EUR | -0.81 | | | NOK | -0.90 | | | SEK | -0.93 | | | CHF | -0.97 | |
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Global Indexes |
Current Level |
% Change |
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| FTSE 100 Index | 5'531.80 | + 0.68 | | DAX Index | 5'983.18 | + 1.09 | | SMI Index | 6'637.24 | + 0.51 | | S&P 500 Index | 1'144.55 | + 0.75 | | DJIA Index | 10'682.05 | + 0.68 | | Nikkei 225 Futures | 10'720.00 | - 0.37 | | Hang Seng Futures | 21'611.00 | + 0.41 |
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World Markets |
Current Level |
% Change |
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| Gold | 1'133.22 | + 0.20 | | Silver | 18.65 | + 0.03 | | VIX | 17.39 | - 2.90 | | Crude wti | 77.47 | - 0.68 | | USD Index | 77.54 | + 0.58 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| CPI, % q/q (y/y) Q4 | 0.0 (2.1) | 1.3 (1.7) | NZD/21:45 | | Wed 20 Jan | --- | --- | --- | | Germany: PPI, % m/m (y/y) Dec | 0.2 (-5.1) | 0.1 (-5.9) | EUR/07:00 | | ILO unemployment, % Nov | 8.0 | 7.9 | GBP/09:30 | | BoE MPC minutes, vote Jan | 9-0 | 9-0 | GBP/09:30 | | CPI, % m/m (y/y) Dec | -0.1 (1.6) | 0.5 (1.0) | CAD/13:30 | | PPI, % m/m (y/y) Dec | 0.0 (4.5) | 1.8 (2.4) | USD/13:30 | | Housing starts, thous Dec | 575 | 574 | USD/13:30 |
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Currency Tech |
EURUSD
R 2: 1.4495
R 1: 1.4410
CURRENT: 1.4260
S 1: 1.4250
S 2: 1.400
USDJPY
R 2: 92.35
R 1: 91.40
CURRENT: 91.25
S 1: 90.50
S 2: 90.00
GBPUSD
R 2: 1.6500
R 1: 1.6460
CURRENT: 1.6345
S 1: 1.6250
S 2: 1.6130
AUDUSD
R 2: 0.9405
R 1: 0.9325
CURRENT: 0.9225
S 1: 0.9170
S 2: 0.9125
USDCAD
R 2: 1.0425
R 1: 1.0340
CURRENT 1.0320
S 1: 1.0220
S 2: 1.0205
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Market Brief |
The USD has made gains against its major counterparts today as risk appetite was burdened by poor economic news and a dovish BoC statement. The headline event of the European morning was UK CPI which surged an alarming 0.6% MoM, 2.9% YoY in December; up from last month’s 0.3% MoM, 1.9% YoY rise. Although potentially suggesting higher borrowing costs may have to be implemented to ward off an overshoot in inflation, the spike is in line with the BoE’s forecasts in the Quarterly Inflation Report last November; and according to the path predicted in that scenario, inflation is expected to fall back towards target in the coming months. GBPUSD, which has rebounded strongly from its 1.5833 lows on 30th Dec, surged to 1.6459 after the release, but the rally failed to gather much momentum and the pair subsequently succumbed to the bout of USD strength, touching a low of 1.6313 before recovering somewhat to 1.6370 levels. The other major release of the morning session was Germany’s ZEW survey, which showed investor sentiment fell more than expected in January to 47.4 (49.5 expected, 50.4 prior), causing EURUSD to slump below its 200 day moving average (around 1.4293), touching lows of 1.4262. So far, the major support of 1.4250 remains intact, but a closing break below there would open up further downside to 1.4000 levels.
During the afternoon session, the markets awaited the latest BoC rate meeting, and as expected, rates were kept unchanged at 0.25%. However, the statement was distinctly dovish in tone; revising down estimates of 2009 GDP from -2.4% to -2.5%, and reducing the growth outlook in 2010 to 2.9% from 3.0% in their prior estimates. Furthermore, they repeated that the strength of the CAD could act as a “significant further drag” on growth, and added that rates could be expected to remain at 0.25% until the end of Q2 2010. In response, USDCAD rallied above the significant 1.0320 resistance to touch highs of 1.0348, and a close above the 1.0320 today would point to a further bullish correction for USDCAD.
Tonight’s release of New Zealand CPI will be an important reading for predicting the future path of interest rates taken by the RBNZ; inflation is expected remain flat on the quarter and tick up 2.1% YoY; any deviation higher would be very positive for the currency as it would likely prompt the RBNZ to shrug off any remaining vestiges of dovish sentiment. Tomorrow’s releases include UK ILO Unemployment (expected to rise to 8.0% from 7.9% currently), Canadian CPI (forecast to fall -0.2% MoM), and US PPI (expected to remain flat on the month).
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Sterling Surges In Asian Session
January 19, 2010 8:53 AM CET
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G10 Advancers and Decliners vs USD |
| | GBP | 0.55 | | | | JPY | 0.20 | | | | NOK | 0.17 | | | | DKK | 0.10 | | | | EUR | 0.09 | | | | SEK | 0.09 | | | | CHF | 0.01 | | | NZD | -0.01 | | | CAD | -0.02 | | | AUD | -0.06 | |
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Global Indexes |
Current Level |
% Change |
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| Nikkei 225 Index | 10'764.90 | - 0.83 | | Hang Seng Index | 21'562.03 | + 0.48 | | Shanghai Index | 3'246.87 | + 0.30 | | FTSE 100 Index | 5'494.39 | + 0.72 | | DAX Index | 5'918.55 | + 0.72 | | SMI Index | 6'603.78 | + 0.42 | | S&P future | 1'135.70 | + 0.30 |
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World Markets |
Current Level |
% Change |
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| Gold | 1'139.00 | + 0.48 | | Silver | 18.79 | + 0.82 | | VIX | 17.91 | + 1.59 | | Crude wti | 78.15 | + 0.19 | | USD Index | 76.98 | - 0.15 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| CPI, % m/m (y/y) Dec | 0.3 (2.6) | 0.3 (1.9) | GBP/09:30 | | Germany: ZEW economic expectations index Jan | 49.5 | 50.4 | EUR/10:00 | | Construction output, % m/m (y/y) Nov | --- | -0.4(-8.5) | EUR/10:00 | | Canada : BoC rate announcement, % Jan | 0.25 | 0.25 | CAD/13:00 | | Net long-term TIC flows, $ bn Nov | --- | 20.7 | USD/14:00 |
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Currency Tech |
EURJPY
R 2: 133.65
R 1: 132.40
CURRENT: 130.30
S 1: 129.95
S 2: 128.95
USDMXN
R 2: 12.825
R 1: 12.778
CURRENT: 12.645
S 1: 12.575
S 2: 12.487
AUDUSD
R 2: 0.9405
R 1: 0.9325
CURRENT: 0.9265
S 1: 0.9170
S 2: 0.9125
USDCAD
R 2: 1.0425
R 1: 1.0324
CURRENT 1.0255
S 1: 1.0220
S 2: 1.0205
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Market Brief |
The USD drifted lower in yesterday’s thin holiday markets but has since recovered to almost flat on the day (DXY 77.00) after news of another hike in the yield of Chinese 1-year bills and confirmation of the long-speculated filing for bankruptcy protection from troubled Japanese airline JAL. Further denting risk sentiment, Japan Consumer Confidence released today slumped to 37.6 in December; down from November’s 39.5 – a revelation that caused a quick knee-jerk sell-off in USDJPY from 90.70 levels down to 90.36 (due to the unwind of carry-trades, rather than genuine speculative demand for JPY). Precious metals have benefitted, with gold above $1140 levels (+0.70% on the day) and silver at $18.80 (+0.90% on the day).
Comments continue to trickle from EU members as they remained engaged in discussion about their strategy for dealing with Greece; latest remarks from the EU members Almunia and Juncker suggested Greece’s proposals were ambitious, and should help rebalance public finances. This reassurance has allowed EURUSD to consolidate above 1.4400 levels, but there still remains significant supply around 1.4480 levels to overcome the recent bearish trend.
This morning’s main data release will be UK CPI expected to climb 0.3% MoM, bringing annualized CPI up to 2.6% from last month’s 1.9% reading. GBPUSD remains well-supported above the 1.6250 pivot level, and overnight has climbed above the 1.6400 resistance level after Goldman Sachs upgraded their assessment for UK growth; suggesting the UK may grow faster than other economies.
The Bank of Canada rate announcement is due at 14:00 CET, where it is expected rates will be left unchanged at 0.25%, and furthermore it is likely that BoC members will affirm commitment to loose monetary policy until the end of the second quarter. It is likely the statement will acknowledge an improvement in global economic conditions, but as one of the more cautious central banks in the G10, they will also probably emphasize that significant uncertainty in the outlook remains (particularly with regards to the country’s biggest trading partner, the US). Nevertheless, Canadian fundamentals are looking stronger, and any significant revisions higher to the inflation or growth forecasts would be positive for CAD. Although we see only a slim risk at this meeting, any discussion of possible exit strategies in the coming year would also be a new and hawkish development.
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