News & Analysis

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From policy announcements to central bank speakers

Next week (27th September - 1st October), the focus quickly shifts from policy announcements to individual central bankers as a swathe of speakers fill the economic calendar, largely due to the ECB’s forum on central banking taking place between the 28th and 29th of September. Rather than being in Sintra (Portugal) as has been customary, the event will take place online. read more

Loonie climbs nearly 1% against the dollar yesterday as risk appetite rebounds

Data out yesterday saw Canadian retail sales climb a preliminary 2.1% in August, offsetting the 0.6% MoM fall in July. The data is a reassuring sign that consumers continue to spend during the recovery, as retail sales remain well ahead of pre-pandemic levels. Today, the data calendar is empty for the loonie, meaning CAD traders will likely focus on broader market developments. read more

Bank of England delivers hawkish surprise, even by the markets standard

The Bank of England today voted unanimously to keep the Bank Rate at 0.1%, while members voted 7-2 in favour of continuing with its existing QE programme. The shift in the QE vote, from 7-1 to 7-2 due to Ramsden joining Saunders in dissenting, set the tone for what was to be a hawkish set of meeting minutes despite their Q3 GDP projection being downgraded by around a percentage point. read more

Loonie retraces losses as traders unwind USD action after Fed

This morning, the loonie, along with other high beta and commodity-linked currencies, is continuing to rally towards yesterday’s highs as European traders unwind much of the USD price action that occurred following the FOMC meeting. read more

Fed signals faster tapering in 2023 but under-delivers on next year’s dot plot

For those looking for an explosive Fed meeting, they may have initially been disappointed by the alterations in the dot plot. However, Powell’s comments meant volatility wasn’t absent in the FX space, with the likes of EURUSD swinging within a 0.55% range and USDJPY climbing over half a per cent higher on the day.  read more

Loonie looks to retrace weekly losses but Fed may stand in its way

Crude oil prices managed to edge up higher in this morning’s session to exceed yesterday’s highs, further helping the loonie to pare back losses if risk sentiment stays supportive. The loonie joins other commodity currencies like NOK and AUD in leading gains against the dollar, however, the extent to which the rally can be sustained is left up to how tonight’s Fed meeting plays out. read more

Loonie sustains large losses but bounces back today as Trudeau set to win election

Preliminary results from the election suggest that PM Trudeau will remain in power with a projected 156 seats in parliament, just one shy of his result in 2019 and 14 short of a majority. However, this may change as Elections Canada turn their focus onto the hundreds of thousands of mail-in votes over the coming days. read more

Canada 2021 election: staying the course

Leading media outlets, such as CBC News, have called the 2021 election in favour of the incumbent Liberal Party. However, against his best wishes, Justin Trudeau's election gambit didn't pay off, with the Liberals expected to remain the largest party in Parliament but with a minority government. Current projections have the Liberals elected and leading in 158 seats, just 12 seats shy of an outright majority. read more

Markets to shrug off Canadian elections with a quick outcome unlikely 

The Canadian dollar’s weakening against USD this morning wasn’t particularly different from other G10 currencies against the dollar, indicating that the occurrence of the Canadian elections so far has had no big market impact. Canadians are heading to the polls on Monday, where Prime Minister Justin Trudeau will hope to increase his popularity on 2019. read more

Central bank bonanza

The 20th - 24th September is packed with central bank meetings, with the FOMC’s decision on Wednesday eyed as the most important economic event by markets. On top of that, the Bank of England is set to release their latest policy decision, while the Norges Bank is expected to be the first G10 central bank to raise rates since the pandemic. read more

Loonie looks to reverse yesterday’s losses, but recent ranges set to hold ahead of election

This morning, with a backdrop of broad US dollar weakness, the loonie is positioned to reverse yesterday’s 0.42% decline as it trades 0.23% higher this morning despite oil markets trading on the back foot. There is little on the data calendar for today, meaning traders are likely to look towards Monday’s election and the last push from party leaders. read more

Loonie rises with oil prices as weather disruptions continue

WTI crude now trades at highs not seen since early August, with next delivery contracts pricing above $72 per barrel. The loonie will continue to focus on oil market developments along with how US data prints today. read more

Canadian CPI jumps above 4%, but BoC set to look through it

Headline CPI rose to 4.1% YoY in August, the fastest pace since March 2003, while on a sequential basis, inflation rose only 0.2%, down from a 0.6% MoM increase in July. The loonie took the CPI data largely within its stride as it briefly dipped below the 1.2670 handle. read more

Loonie down ahead of Canadian CPI

Today, all eyes are on Canadian CPI, which is released at 13:30 BST and is expected to show the headline rate climb further from 3.7% YoY to 3.9%. However, the sequential pace of price growth is expected to fall, with the MoM reading expected at 0.1% - down from July’s reading of 0.6%. read more

UK inflation jumps to highs not seen since 2012, putting floor underneath GBP

This morning’s CPI data saw headline inflation rise from 2% in July to 3.2% in August, above expectations of an increase to 2.9%, while the core measure also rose substantially from 1.8% to 3.1%. On a monthly basis, which removes favourable base effects, inflation showed rapid sequential growth; CPI rose 0.7% MoM after printing flat in July. read more

Antipodean update: light at the end of the tunnel, but risks remain elevated

Our Monex analysts expect NZD to outperform in the short-run due to diverging monetary policy with Australia, however, a more stable macro backdrop in February 2022 should enable the RBA to start ramping up its normalisation cycle and thus AUD should benefit from a delayed tailwind. read more

Loonie boosted by WTI climbing above $70 per barrel in yesterday’s session

The Canadian dollar was boosted by higher oil prices in yesterday’s session as OPEC+ analysts estimated oil demand would rise above pre-pandemic levels next year on the back of adverse weather and another storm is expected to hit the American gulf. The combination of the two sent WTI to highs not seen since August 8th, adding a tailwind to the Canadian dollar by doing so. read more

Loonie set to focus on politics as campaigns enter the final week

This week, the loonie’s focus is likely to shift towards the upcoming election as campaigns enter their final week, with polls suggesting that Conservative leader O’Toole remains the front runner. Outside of politics, the loonie will likely be impacted by August’s CPI data on Wednesday. read more

Inflation to sit top of mind next week

Next week’s data calendar focuses heavily on inflation data in major developed market economies, while core CPI readings from Poland and inflation expectations data in Turkey will be viewed amid historically high CPI readings. read more

Another bumper jobs figure for Canada

Canada’s economy added another 90,200 jobs in August after posting a similarly elevated 94,000 net employment gain in July. This now leaves the overall employment just 0.8% below February 2020 levels, the closest it has been since the pandemic began. The data has compounded positive sentiment around the loonie. read more

Loonie looks to retrace weekly losses ahead of August’s labour market data 

Today, the loonie continues to grind higher as high beta currencies lead the charge against the dollar. The loonie’s strong start to the session comes ahead of today’s pivotal August labour force data, which is expected to show a further 67.5k jobs added when released at 13:30 BST. The sectors in which the jobs are added are as crucial towards the back-end of the recovery as the net job increase itself now. read more

UK economic recovery stalls in July

Data this morning showed that the UK economy expanded at just 0.1% MoM in July, undershooting expectations of a 0.5% expansion and slowing from June’s 1% growth rate. The data not only undershot market economists’ expectations, but also those of the Bank of England. The central bank expects the economy to expand 3% in Q3, but with third quarter growth starting on such a weak base, it looks unlikely that their forecast will be met. read more

EURUSD mildly ticks up after statement confirms slowdown in PEPP 

The euro enjoyed today’s decision by the European Central Bank to reverse engines and moderately slow down net purchases under the Pandemic Emergency Purchase Programme (PEPP), even though this was widely expected by markets as all signs were pointing to slower purchases. read more

Loonie under pressure as bearish forces compound

Rising Covid cases and political volatility provide the backdrop for the Bank of Canada, with Prime Minister Trudeau lashing out at Conservative leader Erin O’Toole over his views on abortion and loosening gun regulations in yesterday’s two-hour French debate. read more

Bank of Canada holds fire but maintains positive outlook

With today’s BoC statement completely following our expectations, our expectations of the normalisation timeline remains intact. We still see the Bank tapering their QE programme by a further C$1bn at October’s meeting, where the idea of delayed growth is likely to be formalised within their latest forecasts, with a final taper pencilled in for December. read more

BoC decision to pass markets by with no policy change expected

For today, all focus turns to the Bank of Canada who will likely tread carefully given the deterioration in the outlook since July as well as the presence of the election campaign. We expect the Bank to hold off on tapering its QE programme until the October meeting, read more

Loonie looks towards US cash open for risk sentiment measure post payrolls

Today, the data calendar remains light, with just the Bloomberg Nanos Confidence measure for the first week of September due out at 13:00 BST, but the loonie’s focus is likely to rest with how US equity markets open and the impact that has on broader market risk sentiment.  read more

Labor day to keep FX action muted after 3-week high in CAD

The loonie rose to a three-week high against the US dollar on Friday after the US jobs report undershot expectations, while gains in crude oil underpinned the loonie as OPEC+ agreed last week to continue with their plan to raise crude output in measures steps as originally agreed. read more

Central banks set to stretch hawkish wings 

Next week, price action in US fixed income markets will continue to garner a lot of market attention, while increasingly hawkish central bank developments will also be in scope. Of note is the Reserve Bank of Australia, who we expect to press on with tapering their QE programme, the Bank of Russia who are expected to hike by 50bps, the National Bank of Poland who will battle with record high inflation, and the European Central Bank. read more

Nonfarms undershoots expectations, confirming previous market pricing

With a total of 235,000 jobs added in August, compared with 1.053m in July, the employment gain undershot expectations by 500,000. While some of the edge was taken off by the July figure being revised up from 943,000 to 1,053m, the lacklustre job growth in August now makes the prospect of the Fed’s median dot signalling a 25bps hike as early as 2022 a distant possibility. read more

Loonie climbs with oil, US payrolls in scope

The Canadian dollar caught up in yesterday’s session, while a boost in WTI added tailwinds to the loonie rally. While election campaigning continues in the background, the limited Canadian data calendar today means the focus for USDCAD will remain on US payrolls and the impact it will have on Fed policy expectations.  read more

Loonie plays catch-up as it failed to join G10 rally yesterday

The loonie struggled to join the G10 rally against the greenback yesterday as oil markets slipped over a percentage point throughout the day as OPEC+ members met. The intraday WTI losses stemmed from headlines where Russia’s oil minister said they could go above the OPEC output quota. read more

Monex Canada September 2021 FX Forecasts

We continue to envisage mild US dollar weakness across the G10 but expect volatility to remain abundant as liquidity conditions improve. In September alone, markets will have to contend with elections in both Canada and Germany, a rate hike from Norway, and pivotal central bank meetings in the US and Europe. read more

Loonie on front foot as WTI notches a 1% gain ahead of OPEC+ meeting

With oil markets up a percentage point ahead of the OPEC+ decision today, the Canadian dollar has completely reversed yesterday’s losses. Officials within the cartel are expected to press ahead with a scheduled 400,000 barrel per day increase in October, wagering that the market can absorb the additional supply. read more

Canada’s economy contracts in Q2 as third wave takes its toll

Canada’s GDP data for June showed the economy expanded 0.7% MoM as provincial lockdown measures were scaled back, but a downward revision for May (-0.3% revised to -0.5%) resulted in the economy contracting in Q2 by 0.3% QoQ. With the economy weathering the tightening of measures relatively well during the third wave and sitting just 1.5% below pre-pandemic levels, today's data is unlikely to unsettle the Bank of Canada. read more

Loonie rallies ahead of June’s GDP release

Despite a rocky start to the week, the Canadian dollar managed to catch up with the G10 rally against the US dollar yesterday as WTI stemmed its losses and US equity markets continued to climb higher on the news of prolonged policy normalisation from the Fed. Today, the loonie continues to grind higher ahead of June’s GDP data release at 13:30 BST. read more

Loonie lags today as oil weighs it down

The loonie picked up a 0.64% gain during Friday’s session, largely thanks to Jerome Powell and the broad US dollar weakness that occurred after his speech. However, recent gains are yet to completely offset the large sell-off in the loonie that has occurred over the course of August. read more

Powell pushes back expectations at Jackson Hole

Despite some FOMC members casting hawkish tones to the media over the past 48 hours, Jerome Powell pushed back expectations of policy normalisation in his speech today by not only refraining from announcing the timing of the tapering but also stating that tapering doesn’t signal the timeline for rate hikes. read more

Focus shifts from Jackson Hole to US jobs data

In the week beginning Monday 30th August, the market’s emphasis shifts to monitoring the severity of the latest Covid-19 waves driven by the delta variant, the economic impact they are having via timely data points, and August’s Nonfarm Payrolls data next week. Fixed income and money markets will be taking their cues from the latest payroll data in order to price expectations of September’s Fed meeting. read more

Loonie begins to retrace losses heading into key Powell speech

Anecdotal evidence suggests increased hedging activity in the USDCAD pair ahead of Powell’s speech today, which in turn drove the large CAD losses despite limited price action in WTI and a lack of Canadian data. read more

Loonie’s position deteriorates along with risk rally as Covid weighs on market mood

The broad deterioration in the risk climate, due to speculation over Fed policy announcements at today’s Jackson Hole symposium and increased Covid risk in economies like the US, means the loonie’s losses aren’t isolated today. The Canadian dollar is instead following the broader G10 move with only the CFIB business barometer on the calendar at 11:00 BST. read more

Softer decline in US Durable Goods Orders underpin US dollar

US Durable Goods Orders fell by less than expected in July, with transportation and defense being the main drag on the figure. Transportation equipment, which was down after two consecutive monthly increases, drove the decrease down by $1.7bn to reach $75.3bn. read more

Loonie hit 1-week high against USD before risk rally ran out of steam

The Canadian dollar hit a one-week high against USD in yesterday’s session amid a continued commodity rally but failed to rise much further since, as the risk rally is less pronounced this morning compared to the rest of the week. read more

Loonie enjoys extension of risk rally

Eased expectations for Jackson Hole and a risk-on market mood weighed heavily on the US dollar, while a robust rebound in oil prices underpinned the loonie. Today’s calendar again is empty for Canada, meaning the loonie remains at the mercy of broader macro developments and risk sentiment. read more

Loonie rebounds along with broader market sentiment

This morning, Brent oil and WTI both climbed as the market rebound extended, with markets now eyeing the OPEC+ meeting which is set to take place on the 1st of September and should provide insight on whether or not the cartel is looking at a temporary suspension of the supply boost given the latest virus developments. read more

Jackson Hole arrives after a volatile week for macro conditions

With a tentative macroeconomic backdrop, next week’s data is likely to have a larger market impact than usual, especially with the quantity of preliminary PMI releases for August. The Fed’s annual Jackson Hole symposium should provide markets with a bit more clarity as to its tapering timeline. read more

UK retail sales fall in July due to transitory factors and Covid concerns

The release of this morning’s UK July retail sales data for July, which saw sales volumes contract by 2.5% MoM relative to expectations of 0.2% growth, pushed the pound slightly lower against the dollar as it compounds falling consumer confidence metrics and tentative risk sentiment after Covid and growth concerns reappeared. read more

Loonie hit with lower US equities and declining WTI

The Canadian dollar has been hit from the double whammy of declining US equities and oil over the past 24 hours, with the loonie sitting 0.85% lower relative to yesterday’s European open at present. CPI data out of Canada yesterday did little to help the loonie notch any gains. read more

July CPI not enough to move the Bank of Canada

Headline CPI came in hot for July, rising from 3.1% in June to 3.7% YoY, above expectations for a reading of 3.4%. However, despite the headline figure climbing towards the Bank of Canada’s forecasted inflation peak of 3.9%, which they don’t expect to be reached until late Q3, we expect the Bank to maintain its stance that the inflationary overshoot is transitory. read more

Loonie continues to suffer from risk-off market pricing

The Canadian dollar continues to sit under pressure due to the broader risk-off move in markets while falling oil prices on the back of moderating demand from Asia isn’t helping the currency stay afloat. Events in Canada are likely to ramp up in the coming weeks with the Federal election now pencilled for September 20th. read more

Trudeau calls snap election, loonie unfazed at present

The worst kept secret was finally confirmed over the weekend as Prime Minister Justin Trudeau met with Governor General Mary Simon to dissolve Parliament and set a snap election for September 20th. The announcement of a firm election date over the weekend had a limited impact on financial markets this morning. read more

One week closer to Jackson Hole

Markets are likely to settle somewhat as they await the headlines from the Jackson Hole symposium on August 27th. Next week’s calendar suggests there may be pockets of isolated volatility with policy decisions from both the Reserve Bank of New Zealand and the Norges Bank, while the Reserve Bank of Australia and Federal Reserve both publish meeting minutes. read more

Loonie driven lower by firming US dollar

The loonie ground 0.18% lower yesterday with the dollar DXY index set to close the week out 0.2% higher. Dollar dynamics continue to be the main driver of the USDCAD pair with little events transpiring in Canada. Eyes will be on inflation and retail sales in Canada next week, with an election potentially set to be called too. read more

Miss in core print sends USD lower

The US dollar rose along with Treasury yields ahead of today’s crucial CPI release as the robust Nonfarms figure from July paved the way for expectations that the Fed may have to take its foot off the gas sooner rather than later. Today’s CPI report showed categories sensitive to reopening moderated, posting their weakest contribution to the MoM gain since March. read more

To hike or not to hike, that is the question

Markets this week have largely focused on underlying growth conditions, FOMC speakers and Friday’s labour market data, with US bond markets sending conflicting signals to FX traders. Next week (9th – 13th August), the key pieces of data centre around rate decisions from Banxico and the CBRT, both of which have reasons to hike rates due to rising inflation but also have grounds to stay pat.  read more

Dollar on the offensive as bumper jobs number is delivered

The labour force participation rate came in at the expected rate of 61.7%, which is a good sign the drop in unemployment is representative of economic conditions, rather than a consequence of people leaving the labour force. read more

Canadian employment underperforms, but it isn’t all bad

July’s employment data out of Canada saw the economy add 94,000 jobs. While on the surface, the slip looks seismic, the nature of the job additions and the stage in which the Canadian labour market recovery is at means the underperformance of the net employment data isn’t as concerning as the headline suggests. read more

Bank of England confirms hawkish disposition

The Bank of England today confirmed to markets that it was leaning on the hawkish side despite interest rates being held at 0.1% and the split on the decision to maintain the current QE programme sitting on the milder side of 7-1. read more

Loonie at the mercy of broader US dollar and moderating oil prices

Today, we expect CAD to be driven by broader market dynamics again, with traders focusing on Friday’s labour market data out of the US and Canada as the next event to define a more definitive idiosyncratic trend in the Canadian dollar. read more

GBP Outlook: Staying bullish on the pound over the medium-term

Headwinds are likely to persist over the coming month as Covid conditions remain volatile. Over the more medium-term, we expect GBPUSD to rally above the 1.40 handle on the basis of a more structural improvement in the growth outlook. read more

Monex Canada August 2021 FX Forecasts

With the economic backdrop stabilising somewhat towards the end of July as markets have finally priced in the latest wave of Covid-19 globally, August could arguably be plainer sailing for FX markets, although risks remain. Given the amount of uncertainties that still remain, we expect the dollar to remain broadly firm over the coming month before our expectation of further dollar depreciation plays out over the medium term. read more

Bank of England in focus after inflation overshoots and labour market progress  

Next week, the focus will be on the Bank of England to announce its policy decision and comment on the recent inflation overshoots and recovery in the labour market. read more

Slip in US Q2 growth rate piles pressure on the dollar

With the dollar already under pressure today as the risk environment stabilises and markets embrace the dovish rhetoric from Fed Chair Powell yesterday, the announcement that the GDP release missed expectations by nearly 2 percentage points put the dollar under the pump some more. read more

Hawkish rate statement is dialled back by Powell, weighing on the dollar

The change to today’s rate statement led to a flurry of USD strength across the board which was driven by a spike in front-end yields as markets position for the likely announcement of the tapering timeline at either September or December’s meeting. read more

Slip in headline CPI trims CAD gains

The Canadian dollar has spent much of today’s European session retracing yesterday’s losses as events in China begin to stabilise. However, the release of June’s CPI data has trimmed the loonie’s rally as inflation data begins to moderate and embolden claims that the overshoot is in fact transitory. read more

EUR Outlook: EURUSD in range bound over summer

The recovery in the euro may hit a hurdle in the next six months as headwinds from policy intensify with both the ECB and Fed decisions set to thrust diverging policy stances back into focus for markets. read more

Loonie looks to post a recovery ahead of CPI release

Despite the turnaround in the US dollar in the afternoon of yesterday’s session, the Canadian dollar failed to reverse losses along with the rest of the G10. The contagion of developments in China into broader risk sentiment continued to weigh on other markets, including US equities and commodity markets – both of which the Canadian dollar is highly sensitive to. read more

Loonie back under pressure as market mood takes a hit

The Canadian dollar is back under pressure this morning as broader market risk appetite takes a hit. However, the USDCAD pair continues to trade in a limited range after a huge bout of volatility at the beginning of last week. The loonie’s focus will remain on broader market developments. read more

Loonie on the back foot as oil takes a leg lower

The Canadian dollar starts this morning slightly lower as crude oil takes a 1.2% tumble. Signs of slowing growth in Japan from this morning’s PMIs, coupled with tightening restrictions in APAC nations due to rising Covid-19 cases, have put oil on the back foot as the demand outlook remains tentative. read more

Q2 GDP data and the Fed are in focus amid a global third wave

Markets will pay close attention to commentary by Chair Powell and the Fed’s assessment of current conditions. A first glance at economic performance in advanced economies in Q2 is also pinned for the week, although growing fears over the coming months might cloud the impact positive GDP figures have on markets. read more

Retail sales beat fails to excite CAD

The release of May’s retail sales data failed to spark any volatility in the USDCAD pair despite the report highlighting a 0.9% beat relative to expectations and a preliminary reading of 4.4% growth in sales in June. read more

ECB makes policy tightening less achievable

In line with the strategy review, the ECB’s statement is arguably net dovish despite the decision including no actual policy changes. Financial markets took the dovish interpretation from the ECB as a positive, with European stock indices holding near intraday highs while EURUSD breaks fresh ground to the upside. read more

Loonie at the mercy of broader market dynamics 

The loonie stood out among the bunch in yesterday’s session as it was the only G10 currency to make inroads against the US dollar. With S&P 500 futures trading slightly lower this morning and oil sitting under a bit of renewed pressure, the Canadian dollar is trading in line with the rest of the G10 market. read more

Loonie drops to 5-month low as OPEC+ decision and Covid concerns take toll

The loonie continues to weaken with the rest of the G10 currency board, but a stabilisation in WTI around $67 per barrel is providing some support for the Canadian dollar. A rebound in US equities may provide a further tailwind. read more

Loonie under the pump as OPEC+ deal weighs on crude 

The Canadian dollar’s losses sit in excess of half a percentage point this morning as the decline in crude oil weighs on the petro-currency. Over the weekend, OPEC+ agreed to boost production by 400k barrels a day each month from August until the Covid-induced production cuts are phased out  - roughly around September 2022 given no disruptions. read more

ECB guidance to take centre stage next week, CBR set to hike rates

The ECB takes centre stage next week, with a revamped strategy review setting the tone for a persistently more dovish course of action in the months to come, while the CBR is set to hike rates further amid a light data calendar. read more

Falling crude oil prices and risk-off mood weigh on loonie

Falling crude oil prices and a deterioration in risk sentiment weighed on the Canadian dollar on Thursday. The combination, along with a stronger dollar, led to USDCAD gaining 0.90% from low to high before the dollar pared back some of its gains against the loonie this morning. read more

BoC: Markets weigh further C$1bn taper against cautious tone

Although today’s decision by the Bank of Canada to taper its QE programme by another C$1bn to reach C$2bn per week was widely expected by markets, the market reaction still was significant as the accompanying monetary policy report provided more cues. read more

Focus on OPEC oil report after BoC decision fails to support the loonie

Yesterday’s BoC decision caused a brief dip in USDCAD before the pair rebounded minutes after as market participants weighed the decision of the Bank to continue taper purchases against the cautious tone cast in the press statement and accompanying monetary policy report. read more

BoC set to taper another C$1bn from its QE programme

This morning, the loonie pared back some of its losses as the US dollar traded weaker across the board, while investors await today’s Bank of Canada policy decision and Fed Chair Jerome Powell’s semi-annual testimony. read more

Weathering the storm

We have maintained our view of a mild depreciation in the broad dollar over the coming 12-month period, but single out currencies that are likely to buck this broad trend as they are exposed to rising US real yields over this horizon. read more

Loonie traders focus on BoC decision after CAD dropped along with oil

Both WTI and Brent prices fell by over 2% before paring back some of yesterday’s losses as a result of a deterioration in risk sentiment. For today, loonie traders are likely to remain cautious ahead of the Bank of Canada policy decision due Wednesday. read more

Bank of Canada expected to taper QE by another C$1bn on Wednesday GDP

The Canadian dollar is sitting close to the bottom of the G10 pile this morning despite crude oil prices remaining steady below Friday’s highs, as a deterioration in risk sentiment following virus headlines is weighing on the procyclical currency. read more

Central banks in focus next week after Fed’s hawkish shift

Next week will be critical to assessing the way forward as a fresh batch of inflation data is released and several central banks face the press cameras. On the side, political developments might add excitement to markets. read more

Canadian economy adds more jobs than expected as lockdowns eased

The Canadian labour market recovered by more than economists expected as provincial lockdown measures were broadly relaxed in June as vaccine coverage expanded. The result of the easing measures was an employment increase of 231,000. But despite the headline figure, the labour market data wasn't all positive.  read more

June labour force survey data will be key for USDCAD 

The Canadian dollar now sits near fresh two-and-a-half month lows ahead of today’s release of June’s Labour Force Survey results. The employment data will be viewed in direct comparison with last week’s Nonfarm Payrolls data from the US. read more

ECB raises the bar for normalisation in the short-run, flexibility is the key for policy

Thursday's announcement by the European Central Bank can be perceived as net dovish in the short-term by markets, as the shift from an asymmetric target to a new symmetric 2% inflation target gives the central bank ample room to run accommodative monetary policy for longer without having to fight markets.  read more

Loonie falls nearly 2% on the week as risk-off vibe compounds oil losses 

The Canadian dollar continues to be embroiled with the demise of the reflation trade as it currently trades at lows not seen since late April. The loonie has been hit with the deterioration in risk appetite over the past two trading sessions to compound Tuesday’s large oil-led losses. read more

Loonie’s losses the greatest since 26th Feb as dollar firms and oil markets wobble

Falling 0.99% against the dollar, the loonie’s losses yesterday were the largest since the 26th of February. The USDCAD rate now sits back up at levels seen in the aftermath of the Federal Reserve decision - nearly 3.5% off recent CAD highs. Loonie traders will continue to eye broad US dollar developments along with oil market dynamics. read more

Loonie unfazed by yesterday’s events but joins G10 rally today with oil 2% higher GBP

The Canadian dollar struggled to find a footing in yesterday’s market. Despite no major headline news and limited action in oil markets, the loonie lagged the G10 move to sustain the largest losses against the dollar on the day. read more

Monetary policy in scope with FOMC minutes and ECB strategy review

This week (5th - 9th July), the meeting minutes from the Fed’s June meeting will be scoured by market participants as they try to gain a clearer view on future US interest rates, and the ECB’s Governing Council is set to also meet next week in Frankfurt to discuss the ongoing policy review. read more

Loonie in focus as OPEC+ works towards final output decision

OPEC+ and their final decision on oil production is in scope for the loonie after the cartel failed to make a breakthrough last week. WTI remains stable above the $74 per barrel level, but could soon be put under pressure if negotiations fail to make any headway. read more

Higher unemployment rate mitigates impact of elevated job gains

The lack of movement in the unemployment figures stifled the impact the net employment data had, as it doesn’t map over into emboldening calls for earlier rate hikes and higher US yields. The June employment data thus resulted in a weakening of the US dollar and a moderation in front-end Treasury yields.  read more

Loonie looks towards US payroll data and OPEC+ decision for direction

For now, markets remain in limbo until any further updates are announced after today’s meeting. The decision around crude oil output and the US Nonfarm payrolls will be the main indicators for loonie traders today, who return from celebrating Canada day yesterday. read more

OPEC production decision to lead the charge as CAD remains flat before the decision

Like the pound, the Canadian dollar managed to weather the storm of a stronger US dollar relatively well yesterday as it closed the session relatively flat. Today, OPEC+ are set to meet to discuss the scaling back of oil quotas, but with a lack of consensus, the result will likely inflict some volatility in crude markets. read more

Monex Canada July 2021 FX Forecasts

The dollar defied our expectations in June after the Federal Reserve surprised with a hawkish outlook on the US economy, signalling two rate hikes as early as 2023. We have adjusted our July forecasts to account for the more sensitive Fed reaction function, but broadly we expect the trend of mild dollar depreciation to continue. read more

Monex Canada’s Vaccine Distribution Chartbook | June 2021

Vaccinations have been an influential indicator for markets over the first half of the year as their rate of administration sets the tone for each nation´s economic rebound and future monetary policy setting. With that in mind, the balance of risks remains heavily tilted to the downside. read more

Loonie looks to flash GDP reading and OPEC decision for direction

The Canadian dollar sold off with the rest of the G10 yesterday as the US dollar rose across the board on safe haven flows. While the US dollar has been supported by haven bids over the past few days, it is expected to slump today on quarter-end and month-end flows. read more

Loonie drops with WTI ahead of OPEC+ meeting

WTI slipped nearly $2 yesterday as it dropped from 2018 highs. The price action in crude oil markets comes just days before a pivotal OPEC+ meeting on Thursday. read more

Loonie driven by broad US dollar with light economic calendar for the week

The Canadian dollar continues to eke out marginal gains against the US dollar this morning as it recovers from fresh lows seen on the 18th of June. Tomorrow, markets can measure the economic hit the latest lockdown measures inflicted with April’s GDP data released, although this is unlikely to be a market moving event either. read more

First Nonfarm Payrolls since Fed may cause significant volatility

Last week, volatility in FX markets was largely driven by the hawkish shift by the FOMC, as broad dollar moves drove price action in G10 currency pairs. This week, the focus remains largely on the US, with the release of the first Nonfarm Payrolls report since last week’s Fed meeting. read more

Loonie set to post weekly gains as it retraces last week’s Fed-induced losses

The Canadian dollar remains at the mercy of the broad US dollar, which continues to swing around as markets try to assess the US interest rate backdrop under the Fed’s latest messaging. read more

A more dovish Bank of England reaction function weighs on sterling 

On the whole, the market reaction is telling of today's Bank of England meeting. The FTSE 100 enjoyed the Bank’s more optimistic outlook on the near-term recovery along with the commitment to keep policy accommodative, however, the same can’t be said about the pound. read more

Loonie loses gains after Fed’s Bostic casts hawkish tone in communications

After rallying throughout much of the European session, the loonie changed course just prior to Bostic’s testimony as US yields rose and continued to after the Atlanta Fed President cast a hawkish message in his communications. read more

USD pending further cues from FOMC members

Powell’s testimony sent the dollar higher on Tuesday night when he admitted that the spikes in prices were higher than the central bank had anticipated. The tip of the hat by Powell to higher price growth reminded markets that the Fed has incrementally shifted more hawkish, as seen in the last meeting’s economic projections. read more

Loonie on a mission to return to pre-Fed levels but progress is slowing

The Canadian dollar joined the G10 rally against the weakening greenback yesterday as it rallied 0.47% over the course of the day. Oil markets continue to help the CAD recovery as WTI sits near multi-year highs just shy of $74 per barrel, but broader US dollar dynamics are a larger driver of USDCAD at present. read more

Loonie finds strength in 2-year highs in crude oil

The Canadian dollar was one of the better performers against the US dollar yesterday as the slide in the greenback as well as a jump in crude oil prices supported the currency. For today, all focus turns to Powell’s testimony in the absence of any data releases of note in Canada’s economic calendar. read more

Markets to tune into FOMC speakers after the Fed’s hawkish shift

The focus next week will now be on US data and whether that can live up to the expectations set by the Federal Reserve, while a few FOMC speakers will provide markets with a bit more clarity on their position on the economic outlook.  read more

Loonie drifts lower despite modest rise in crude oil markets

The Canadian dollar is one of the few G10 currencies this morning that have gone past Friday’s lows against the US dollar despite oil prices sitting higher than Friday and climbing above $72 a barrel. Despite early losses, the loonie now sits relatively flat against the dollar. read more

UK retail sales decline from April’s reopening surge

Retail sales data continues to print in a volatile manner as reopening effects distort both April and May’s data, while base effects render the year-on-year figure redundant. After surging 9.2% MoM in April after the reopening of non-essential retail stores on April 12th, headline retail sales contracted by 1.4% MoM in May. read more

Loonie hit by the hawkish Fed announcement and now trades 2% below recent highs

The loonie’s price action yesterday places USDCAD at highs last seen in April, with the Canadian dollar trading over 2% lower relative to the 6-year high recorded earlier this month. The surge in the US dollar is placing pressure on crude oil markets this morning, which isn’t helping the loonie stem yesterday’s losses. read more

Fed eyes exiting stimulus measures via the fire escape as inflation pressure heats up

Very little forward guidance on the Fed’s normalisation cycle was given by the head of the FOMC, which was again another attempt to temper the reaction in financial markets to avoid another “taper tantrum”. The Fed’s slow and well signalled approach to the announcement of QE tapering continues. read more

Loonie stumbles to 7-week low as industrial material prices fall, Fed in focus

The Canadian dollar fell 0.33% over the course of yesterday’s session as copper prices tumbled over 3%, while other commodity prices including lumber also moderated from recent highs. This weighed on the Canadian dollar, despite a higher oil price helping other petro-linked currencies like NOK and MXN. read more

A week of central bank decisions but the Fed will draw most of the focus

The Federal Reserve, Central Bank of the Republic of Turkey, and the Central Bank of Brazil are likely to be the most exciting on this week's agenda. Over the weekend, events in the UK will focussed on the government’s decision to stick to its June 21st reopening plan as cases of the delta variant rise.  read more

BoC Deputy Governor Lane continues the Bank’s optimistic tone on growth

US CPI wasn’t the only catalyst for the loonie, however, as Deputy Governor Tim Lane presented an economic update in the afternoon of the US session. Lane highlighted that near-term inflation was one of the key issues discussed at the latest policy meeting. read more

ECB strikes balance between growth upgrade and dovish rhetoric 

Today’s ECB meeting was always a question of how the central bank could communicate an improvement in economic growth forecasts in a fashion that doesn’t move market expectations of policy tightening preemptively. read more

Bank of Canada maintains message in line with expectations

Wednesday's Bank of Canada policy decision fell broadly in line with both our own and consensus expectations. That is, the Bank balanced a slip in near-term economic data with an improving external backdrop and growth outlook in order to hold policy and maintain the projections generated in April's Monetary Policy Report. read more

Patience is the aim of the game

The Bank of Canada are set to announce their latest policy decision at 15:00 BST/ 10:00 ET on Wednesday June 9th, with Deputy Governor Timothy Lane scheduled to give an economic progress report on Thursday 10th. read more

BoC set to hold fire until July, emphasis is on their reading of recent data 

The loonie joined the rest of the G10, excluding the Swiss franc, in weakening against the dollar despite WTI cracking above $70 a barrel. Today, the loonie continues to trade in line with the broad US dollar move as it retraces part of yesterday’s decline. read more

Loonie trades in tight ranges ahead of Bank of Canada decision 

With little scheduled on the economic calendar today beyond April’s merchandise trade data at 13:30 BST, and with the Bank of Canada set to release their latest policy decision tomorrow, today may be a muted day for the loonie. Price action is likely to be largely determined by broad US dollar moves and positioning ahead of tomorrow’s meeting.  read more

It is all about PEPP

Looking ahead, central banks will come back to the fore next week with the European Central Bank, the Bank of Canada, and the Bank of Russia releasing their latest policy decisions. The ECB is likely to steal the show as speculation over the next PEPP decision rises. read more

Both Canada and US labour market reports underwhelm expectations 

After the data print, USDCAD dropped over a tenth of a percentage to reverse gains on the day. This is largely because of yesterday's price action in markets and the higher expectations attached to the US economic recovery in response to the performance of the latest data. read more

Monex Canada June 2021 FX Forecasts

Over the course of May, the dollar downturn exceeded our expectations, while for certain currencies, market participants preemptively priced in the economic reopening as vaccine optimism picked up. Looking ahead, June is likely to prove pivotal for major currency pairs. read more

Canadian GDP for March fails to excite loonie

Today's March GDP data from Canada came in broadly as expected, with the economy expanding 1.1% month-on-month vs expectations of 1%  as lockdown conditions continued to ease, while the Q1 annualised data undershot market expectations by 1.2% after printing at 5.6%.  read more

All eyes on US and Canada labour market data after underwhelming April reports

Next week (31st - 4th June), the focus turns to labour market data from the US and Canada after April’s underwhelming reports. Also on the agenda are policy decisions from the RBA and Reserve Bank of India and China’s official manufacturing PMI. read more

Recovery Fund key for eurozone recovery but risks remain

The ECB’s response to the 2020 pandemic was largely similar to the response rolled out in 2008 during the onset of the global financial crisis. In this analysis piece, we dive into the policy differences between the two crises and take a look at the composition of the recovery fund. read more

Monex Canada’s Vaccine Distribution Chartbook | May 2021

May has been a decisive month in the global vaccination campaign, as an accelerated delivery in some advanced economies has led to comprehensive reopening plans and brighter economic prospects. read more

Social spending underwhelms in latest CHAPS data due to hesitant consumer mobility

Taken on the whole, the release bodes well for May’s GDP rebound as consumption remains robust, however, the real-time data continues to underperform as consumers remain hesitant to take public transport in order to spend. read more

Limited top-tier economic data puts USD dynamics further into focus

Next week (24th - 28th May), the economic calendar is light on major market-moving events. US PCE inflation stands out as the most high profile data point on the calendar along with the latest RBNZ rate decision, while the focus will remain on central bank speakers. read more

UK flash services PMI underperforms expectations but only due to the survey window 

Sterling shrugged off this morning’s strong retail sales data, suggesting there is a high bar for UK economic data to clear before it adds any further upside to the pound. Much of the initial rebound due to lockdown measures easing has been priced into UK financial assets over the course of the last month. read more

UK retail sales beats expectations, placing recovery on a firm footing

Today’s UK retail sales data gives markets the first piece of hard economic data that pertains to how the consumer reacted to the April 12th reopening. The data print didn’t disappoint, with retail sales climbing above expectations by 4.7 percentage points to 9.2% month-on-month in April, while sales excluding auto fuel climbed 9%. read more

Headline inflation overshoots, but not a concern yet for the BoC

Today’s CPI release saw headline inflation rise from 2.2% in March to 3.4% YoY in April. The print was marginally higher than expectations, which sat at 3.2%, but despite the figure exceeding the Bank of Canada’s 2% target, it won’t cause concern among the Governing Council just yet. read more

Reopening reignites sterling’s rally

Following the Bank of England's latest projections, which we are inclined to agree with, we anticipate GBPUSD to rally to 1.46 in the coming twelve months, although the level of uncertainty around our medium-term forecasts remains high. read more

US CPI brings volatility to FX markets as real yields yo-yo

April’s US Consumer Price Index figure was set to be the first large inflation print significantly above 2% as a low base from last year and surging commodity prices this year set a high bar. The 4.2% YoY increase in the headline print did not disappoint and comfortably exceeded market expectations which were set at 3.6%. read more

Central bank speakers are key as speculation on policy normalisation rises

Next week (10th - 14th May), the focus remains on central bank policymakers as market speculation regarding policy normalisation remains elevated. In the week ahead, we take a look at Banxico's upcoming policy decision as well as recent Fed commentary and the upcoming data calendar. read more

Nonfarm Payrolls undershoot expectations, prompting USD weakness and a flattening in the Treasuries curve

The bar was set high for today's Nonfarm payrolls figure after March saw the economy add nearly a million jobs and the gradual economic reopening appeared to be pulling people back to work, especially in the hospitality sector. read more

Canada labour market recovery unwinds due to restrictions being tightened

Canada's net employment gain today was always going to be negative after public health measures tightened in key provinces. The loonie retraced early losses to trade closer to yesterday's multi-year highs upon the release, but arguably this was more to do with the slip in US jobs data than Canada's own release. read more

Bank of England reactive: Signs of optimism not enough to talk about normalisation

The Bank of England not only upgraded its economic projections but also decided to taper their QE programme from £4.4bn to £3.4bn until August. However, while this would be seen as a hawkish development, BoE members stressed how their QE programme differed from the likes of the Bank of Canada and the Federal Reserve. read more

Loonie hits fresh 3-year high as commodity tailwind resumes

Today, the loonie is at the mercy of broader market dynamics as it joins NOK in sitting higher against the US dollar as oil prices climb back towards $66 per barrel. Economic data out of Canada will have to wait until tomorrow when key labour market data for April is released. read more

Loonie unwinds from recent highs as greenback puts up a fight

After hitting multi-year highs on Monday, the Canadian dollar was especially susceptible to the rebound in the broad dollar, however, losses of 0.24% only place the loonie in the middle of the G10 pack. read more

Monex Canada May 2021 FX Forecasts

The anticipated US dollar downturn materialised over the course of April, with the greenback sustaining losses across the board. Looking ahead, we expect the dollar downturn to continue over the course of Q2, although we argue that most major catalysts over the next month have now been baked into current pricing, meaning a stabilisation in the US dollar could occur in the near-term. read more

Central banks to keep cards close to their chest ahead of broader reopening in DM space

Next week (3rd - 7th May), central banks will continue to take centre stage with policy decisions by the CBRT, Norges Bank and the RBA. However, it's the Bank of England who is poised to line up among the more hawkish central banks next week, when revised economic projections firm expectations of “ QE tapering later in the year. read more

Canada GDP print set to reveal the damage from Q1 restrictions

The last week of April saw the Canadian dollar gain 1.70% against the US dollar as USDCAD dropped to levels last seen in early 2018. A combination of rising crude oil and commodity prices buoyed demand for the loonie this morning, with WTI rising 2% over the course of yesterday, while the currency also continues to find support in the Bank of Canada decision from earlier last week. read more

European vaccine rollout takes centre stage while developing countries struggle with a dire Covid situation

We continue to track the evolution of the vaccine rollout in major economies, as a timely gauge of potential reopening and global economic recovery. In this edition, we highlight the European efforts to catch up with front-runners like the UK and US, while stressing the dire picture in some emerging markets. read more

Loonie to continue gaining but progress to slow

Looking ahead, we maintain our view of a cyclical and structural rally in the Canadian dollar. However, we expect the speed of the rally to start to fade as the loonie carves fresh multi-year highs over the course of the coming months. read more

FOMC and BoJ to stay on hold after significant March meetings, EU recovery fund in focus

Next week (26th - 30th April), policy decisions by the Federal Reserve and Bank of Japan are due, but few surprises are expected. Meanwhile, the soft deadline for the EU recovery fund could see politics drive EURUSD towards the back-end of the week. read more

ECB fails to excite markets with placeholder meeting

As expected, Lagarde left everyone in the dark as to when the ECB will scale back PEPP purchase as she wants to make that decision based on updated projections that are coming in June. Instead, she made it clear that any phasing out of PEPP would be premature as of now. read more

Loonie surges most since June 2020 after BoC taper QE and signal earlier lift-off 

The loonie’s strength occurred after the Bank of Canada released its latest policy decision at 15:00 BST, which saw the central bank taper its QE programme by C$1bn a week to C$3bn in minimum weekly purchases. read more

Bank of Canada tapers QE and casts hawkish tone for markets to digest

This hawkish message from the BoC was coupled with the fact that their estimate of potential growth was lifted from an average of 1.4% over 2021-2023 to 1.6%, which in usual times would have been taken as a dovish twist. read more

Loonie sustains losses as oil falls, BoC tapering in scope for today

The central bank meets today at 15:00 BST and is expected to taper its QE programme from C$4bn a week to C$3bn as the overall programme approaches the confines of its scope. With the BoC being the first major central bank to announce the tapering of its QE programme, how the message is delivered will be key for FX markets. read more

Loonie lifted by bumper fiscal package ahead of BoC meeting

The loonie struggled to join the G10 rally in the run-up to last night’s Federal Budget, however, after Finance Minister Chrystia Freeland outlined C$101bn in new spending over the course of the next three years, the loonie quickly retraced its losses to drive back up to recent highs. read more

QE in focus next week with ECB and BoC meetings

Next week (19th – 23rd April) investors will keep an eye out for the overdue FX report from the US Treasury department, while ECB, BoC and CBR meetings sit prominently in the calendar. Prior to the BoC, however, is the Canadian budget, which is due on Monday.   read more

Euro rally hinges on improved vaccine rollout in Q2

With the European Commission setting an optimistic target for the number of vaccines administered in Q2, and supply contracts set to confirm this goal, we anticipate EURUSD to rally on a cyclical basis as the region catches up with the likes of the US and UK. read more

Loonie embraces weaker dollar post CPI to stem losses and keep a footing at the 1.25 handle

After sustaining heavy losses in the morning session, the loonie retraced much of the move to cap losses at just 0.23% on the day. The US CPI print not only resulted in broad USD weakness, which helped the loonie to recover, but its strong reading also implied more expensive imports for Canada. read more

Governor Kavcioglu’s first CBRT decision to grab markets’ attention while the RBNZ should deliver no surprises

Next week (12th - 16th April), Covid developments will stay top of mind, while rate announcements from the Reserve Bank of New Zealand and Central Bank of the Republic of Turkey are scheduled. Both banks are set to hold rates next week, with the CBRT decision proving more salient given recent political interference and lira weakness. read more

Lane leads decision to increase PEPP as ECB combats reflationary dynamics

The ECB meeting minutes made it abundantly clear that the March decision to significantly increase PEPP purchases wasn’t implicit yield curve control, but the main area of concern was the rise in longer-dated yields and the risk free rate and the impact it could have on broader financial conditions. read more

FOMC and ECB meeting minutes to guide markets after Easter

With most markets breaking for a long weekend, next week looks to be another where thin liquidity in markets could exacerbate marginal moves on the back of light economic data and events. Looking ahead to next week’s calendar, Turkey’s CPI data on Monday and the release of central bank meeting minutes stand out. read more

Monex Canada April 2021 FX Forecasts

Dollar strength wasn’t just a theme over the course of the last month, but for Q1 as a whole. Reflationary dynamics in the US, brought about by a strong vaccination roll-out and additional fiscal stimulus packages, caused FX markets to price in US economic outperformance. read more

Flat Japanese yields on the back of YCC sets the ground for a weak yen recovery

Contrary to our expectations of a smooth rally throughout the year, the Japanese yen broadly weakened against the US dollar over the first quarter of 2021. Most of the yen’s underperformance is attributable to a stronger dollar as markets aggressively priced in a faster economic recovery and sooner-than-signalled monetary policy normalisation from the Federal Reserve. read more

Remaining mildly bearish, but finding pockets of deeper depreciation

Together, both Biden's fiscal stimulus package and more aggressive vaccine rollout in the US have increased the likelihood that the US economy will substantially outperform peers in 2021, reflected in both the increase and steepening of the US yield curve. read more

Loonie looks to API report in lieu of any Canadian economic data 

Today, in lieu of any Canadian economic data and central bank speakers, the focus will be on the API crude inventory report and the impact that will have on WTI prices ahead of tomorrow’s more market-moving DoE report and Thursday’s OPEC+ decision. read more

Light events calendar vs thinning liquidity conditions

Events are light from the 29th March – 2nd April 2021 in FX markets. However, key headlines from the OPEC+ meeting and February’s Nonfarm Payroll data may induce FX volatility as liquidity conditions thin. read more

Loonie slumps with oil but bounces back today on improved risk appetite

After enjoying the stabilisation in oil markets, the loonie slid with crude yesterday as the dollar firmed and placed pressure on the tentative risk environment. Rising US treasury yields and a slide in crude oil did little to offset the positive returns in US equity markets, which tends to be highly correlated with CAD price action. read more

Loonie struggles to pounce on hawkish comments by Gravelle as oil markets plummet

Coupled with renewed lockdown fears in Europe and rising case counts in other regions such as India, the news weighed on WTI futures. Today, the DoE crude inventory report at 14:30 GMT will be key, with oil markets having stabilised largely due to a ship blocking the Suez Canal – a key shipping lane. read more

Bank of England looks to hold the ship steady with placeholder announcement

While developments have been positive since the February meeting, the Bank of England decided to marginally push back against market expectations of an earlier normalisation by maintaining the current pace of quantitative easing (£4.4bn weekly) and requiring visible progress in inflation data towards the target. read more

Fed underdelivers with dovish dot plot weighing on dollar

Market pricing leading into tonight’s FOMC decision was tilted towards the hawkish side. Not only were money markets pricing in numerous interest rate hikes from the Fed, but yields were higher and the dollar firmer across the board. read more

Confidence issues challenge improved vaccination prospects

Vaccine rollout continues in March for its third month now, but significant obstacles still stand in its way. Since our February chartbook, increased supply plans by the single-shot drug of Johnson & Johnson have improved prospects for the global campaign, with the pharmaceutical company expanding delivery plans by 0.6 billion doses. read more

Loonie sits near multi-year highs but Fed poses big risk going forward

The Canadian dollar continued to log advances against a broadly softening US dollar yesterday after a slip in retail sales sent the greenback lower. However, the broad dollar trend remains tentative with the Federal Reserve pencilled in for this evening. read more

Federal Reserve preview: Look to the projections for guidance as Powell may keep lips tight

The March 17th FOMC meeting is likely to be one of the most important for Chair Powell in his tenure at the helm of the central bank, with many drawing comparisons with the task presented to his predecessor Bernanke back in 2013. read more

Suite of central bank decisions in focus as US 10-year breaks 1.6%: Fed and BoJ set to take the lion’s share of attention

This week, the yield story saga continues, with the Federal Reserve returning from its communications holiday with a fresh monetary policy decision along with policy decisions by the Bank of England, Bank of Japan, Central Bank of Russia, Central Bank of the Republic of Turkey, and the Norges Bank. read more

Loonie fights off USD bounceback ahead of February’s Labour Force Survey data

The loonie enjoyed the improvement in the risk environment yesterday as it rallied 0.68% to sit 1.06% higher on the week. Bank of Canada Deputy Governor Lawrence Schembri’s speech to Restaurants Canada yesterday didn’t add much to the Bank of Canada’s overall message sent out via Wednesday’s policy statement. read more

UK economy weathers storm better than expected with January’s growth hit just 2.9%

With growth contracting 2.9% MoM as the UK entered stricter nationwide lockdown measures in January, a smaller hit to the service sector (-3.5% vs exp -5.5%) and positive growth in construction output (0.9% vs exp -1.0%) meant the data printed a full 2% higher than the median expectation supplied to Bloomberg. read more

ECB meets expectations and ramps up near-term PEPP purchases

The big question for the ECB heading into today’s meeting is whether the Governing Council was going to rally behind a common message in relation to the recent rise in euro-area yields. That question has been answered with the ECB coming straight out of the block with the announcement that PEPP purchases will be “significantly” ramped up in the coming quarter. read more

Bank of Canada offsets hawkish message with downside risks

The Bank of Canada outlined the slew of negative risks that remain to the outlook despite incoming data beating expectations. The biggest risk beyond that directly related to the virus is the level of slack that remains in the labour market. read more

BoC may temper expectations today before announcing QE tapering further down the line

The loonie’s focus today will be on both of those dynamics, with the Bank of Canada set to announce its latest policy at 15:00 GMT, while US inventory data is due out shortly after at 15:30 GMT. With no press conference following, we expect the BoC to hold fire on altering policy, opting to wait until April’s meeting when all communication channels are open. read more

Loonie unlikely to deviate from broad G10 move with BoC tomorrow

This morning, the Canadian dollar is trading on the offensive along with G10 counterparts as the broad US dollar environment flips amidst a cooldown in fixed income markets. Data out yesterday saw the Bloomberg Nanos Canadian Confidence Index reach a three year high last week. read more

Central banks vs bond markets: BoC and ECB in question

After a volatile end to last month, the focus of FX markets continues to be on developments in the fixed income space. This week, the dollar has reigned supreme yet again despite mixed messages coming from the Federal Reserve over bond yields. read more

Loonie stuck trying to second guess BoC as oil markets climb

This morning, a higher WTI price is helping the loonie somewhat, but the impact rising middle eastern tensions is having on oil prices is yet to filter into FX markets as the move is seen as transitory. The data calendar is light ahead of Wednesday’s BoC meeting, with just the Bloomberg Nanos survey results due today at 13:00 GMT. read more

Loonie jumped with oil post-OPEC, but a rising US dollar smashes it back down

Loonie price action yesterday had to deal with multiple conflicting developments. In the late part of the European session, news that OPEC+ would not increase production through April sent WTI $4 per barrel higher, aiding petro-currencies such as CAD, while Jerome Powell sparked another leg higher in US yields, resulting in a broadly stronger dollar. read more

OPEC+ set to increase production as demand conditions firm

The move in the 10-year CGB comes at a time when vaccine distribution in Canada severely lags that of the US. There is little scheduled in the calendar for the loonie today beyond the OPEC+ meeting, which will likely see oil output increased in the region of 0.5-1.5m barrels per day. read more

Sunak unveils bumper budget, but markets weary that someone has to foot the bill

Sterling has been relatively stable throughout today’s budget, while front-end gilt yields have risen the most in the developed market space today – up 3.9bps on the 2-year. While the moves are minor, they come at a time when the dollar trades stronger against the G10 and front-end yields sit flat. read more

CAD not providing any fireworks ahead of tomorrow’s OPEC+ meeting

In oil markets, WTI trades just shy of the $60 mark on the eve of the OPEC+ meeting. The cartel is expected to outline plans to scale back previous production cuts, with a 1.5m barrel a day increase up for debate on Thursday. read more

Monex Canada March 2021 FX Forecasts

FX market price action focused heavily on vaccine developments and reflationary dynamics in February. Given the important role vaccine distribution plays in FX price action, we launched a monthly vaccine distribution chartbook as a means to monitor major vaccine developments around the globe. read more

Rising yields place pressure on fiscal plans and central banks

Rising yields captured the focus of FX markets last week, as the dollar bounced back into action with US equities also feeling the pain. The question for markets now is where do we go from here? Many have already suggested that central banks will start to intervene further in bond markets to keep borrowing costs low and aid the economic recovery. read more

Loonie could get volatile with OPEC set to meet on Thursday

This morning, the loonie is back on the front foot, but trades a far distance from Thursday’s high. Volatility is scheduled for the loonie this week, with the OPEC+ meeting on Thursday holding the potential for a repricing in crude oil, especially if a plan for bringing production back online is outlined. read more

Loonie caves to pressure as US equity markets trade in the red with USD on a rampage

US equity markets finally placed too much pressure on the loonie, which ultimately succumbed to the pressure to post losses of 0.73%. Today, the Canadian 10-year has played catch up as it now trades inline with the US 10-year, while front-end yields sit higher on expectations of the Bank of Canada normalising policy earlier than the Fed. read more

Loonie cracks 3-year high as oil markets aid the rally

The Canadian dollar overcame yesterday’s midday wobble to continue surging towards 2018 highs. The loonie rallied 0.6% against the greenback yesterday to carve a fresh 3-year high, with the bullish sentiment continuing in this morning’s session. read more

Loonie takes cues from higher crude oil prices ahead of Macklem’s speeches

The loonie was slightly weaker against its US counterpart in yesterday’s later trading session after rising to its highest level since 2018. The currency caught a modest bid overnight on the back of firmer crude oil prices as WTI briefly touched $63/b this morning while Brent oil is floating above $66/b, its highest since November 2018. read more

Sterling unmoved by Johnson’s roadmap as path out of lockdown is still mired with uncertainty

Sterling was unmoved by today’s release of the roadmap to the recovery, with much of the announcement leaked prior to the Prime Minister’s formal statement. It was widely signalled this morning that schools are set to reopen on March 8th, and outdoor gathering limits eased along with outdoor sports facilities opened on March 29th. read more

GBP in focus next week as PM Boris Johnson carefully outlines exit plan 

With limited top tier data releases in next week’s calendar, we take a look at next week’s announcements in the UK and what they mean for the pound, while also preparing for the upcoming Reserve Bank of New Zealand policy decision due to be released on Wednesday. read more

Loonie slips from fresh highs as oil trades below $60 and the US dollar bounces back

The loonie is down a quarter of a percentage point against a broadly strengthening US dollar this morning. The move comes after the Canadian dollar carved fresh highs against the greenback in the early part of the Asian session but failed to hold onto them as the US dollar finds another wave of support upon the European market open. read more

UK retail sales data shows toll of January lockdown, but markets look ahead to Johnson’s roadmap to recovery

Sterling has dipped from session highs after headline and core retail sales figures for January undershot expectations substantially this morning, evidencing the toll January’s lockdown has had on the UK economy. read more

Vaccine distribution remains in focus as many challenges lie ahead

As markets focus on the distribution of vaccines, both on a country and global level, in order to gauge the timeline for the scaling back of lockdown measures and the resumption of economic recoveries, our monthly vaccine distribution chartbook will log developments in vaccine distribution and the viability of government targets in major economies. read more

Loonie dragged down by broad bounce in USD despite WTI closing above $60

Today, the Canadian data calendar takes a look at January’s CPI data at 13:30 GMT, but the release is likely to have a major market impact considering the Bank of Canada has nailed expectations of rates remaining at the lower bound until 2023. read more

Dollar dynamics still drive markets as current economic conditions remain stagnant 

Markets are set to be quiet next week, especially on Monday with the combination of Lunar New Year celebrations in Asia and a federal holiday in North America. However, the European session could open quite choppy given the limited liquidity in markets and expectations that Italy could approve Mario Draghi as the next Prime Minister over the weekend. read more

CAD to continue structural rally but near-term headwinds remain

Since our last CAD outlook, data released from Canada has been mixed. Sentiment gauges, PMIs and other soft data points have remained robust. Meanwhile, more timely hard data such as January’s labor force survey visibly highlight the pressure the Canadian economy remains under during the latest lockdown measures. read more

UK economy contracts by 9.9% in 2020, largest decline since 1709, but sterling isn’t moved on the announcement

Today’s data release saw December’s preliminary GDP print at 1.2%, slightly higher than expectations of 1.0%. This brought the overall Q4 reading into positive territory, with the economy expanding by 1% QoQ in the final quarter of the year. read more

Dollar dominates G10 FX again as DXY rises to trade near 2-month high

Central bank meetings in Sweden and Mexico are set to be less dramatic than that from the Bank of England on Thursday. Meanwhile, political developments in Italy and the US will remain in scope. Former ECB President Mario Draghi will continue talks over the weekend with party leaders. read more

Dollar dominates G10 FX again as DXY rises to trade near 2-month high

Central bank meetings in Sweden and Mexico are set to be less dramatic than that from the Bank of England on Thursday. Meanwhile, political developments in Italy and the US will remain in scope. Former ECB President Mario Draghi will continue talks over the weekend with party leaders. read more

Loonie looks to break-even this week despite labour market slip

The labour force survey highlighted that the sizably negative print in today's data was due to the effects of December's reference period occurring so early in the month (6th-12th December). After which, a number of provinces extended lockdown measures in response to increasing Covid-19 cases. read more

Get ready for negative rates, but that doesn’t mean they’re coming!

While many anticipated the BoE would maintain its current policy stance in light of the recent economic headwinds posed by the national lockdown measures, which the central bank expects to cause a 4% drop in GDP in 2021 Q1, the MPC gave long-awaited clarity over the operational viability of negative rates in the UK financial system. read more

Loonie trades quietly as data calendar is sparse, despite dovish comments from BoC Deputy Schembri

The Canadian dollar had a fairly quiet day against its US counterpart yesterday as it closed the session out just 0.04% lower. Without any groundbreaking news out of Canada, we expect this theme to persist until Friday’s labour market data provides fresh data to judge the Canadian economic recovery off of. read more

Monex Canada February 2021 FX Forecasts

January has proven to be an indecisive month for FX markets. After looking through most of the near-term risks in December and the first week of January, tighter lockdown measures and concerns over vaccine efficacy and distribution thrust the previous risk environment into a bit of a tailspin. read more

Bank of England’s discussion around negative rates will draw the focus of FX markets next week

Next week, the focus remains on central banks with the Bank of England, Reserve Bank of Australia and National Bank of Poland due to release fresh policy decisions. Meanwhile, focus will remain on the distribution of vaccines globally as key providers struggle with supply constraints. read more

Fed fireworks don’t go off as QE tapering not in question

No fireworks were expected and none were delivered in tonight’s FOMC press statement. The Federal Reserve left its monetary policy instruments unchanged but indicated the central bank will do everything they can to promote economic recovery and thereby the Fed’s maximum employment and price stability goals. read more

Loonie mired with deterioration in risk climate as “buy American” remains a concern

The loonie failed to hold onto early gains in yesterday’s trading session as oil prices plunged at around 16:00 GMT, pushing the Canadian dollar back into the red over the course of the day. The loonie now sits over a percentage point lower from Thursday’s 33-month high. read more

FOMC in scope next week as QE tapering dominates investor focus

Markets have focused on the wedge of central bank announcements this week, with notable meetings from the Bank of Canada, the Bank of Japan and the European Central Bank. In Canada, Governor Macklem’s optimistic tone resonated with markets and led the loonie to notch a fresh 33-month high against the dollar. read more

A post Brexit Britain leaves sterling at the mercy of Covid-19 developments

The stale nature of Brexit developments over the course of Q4 means it has been some time since our last GDP outlook. In the latter stage of 2020, despite Covid-19 developments, the pound continued to trade based off no-deal Brexit risk as the clock wound down and negotiations stalled. read more

Lagarde deflects questions on PEPP, leaving little impression on the euro

The European Central Bank left monetary policy unchanged today, in line with market expectations, as virus developments and the extension and tightening of lockdown measures didn’t prove dramatic enough to prompt any change of course. read more

Loonie gets green light to hit fresh highs as mini rate cuts pushed out of scope

Today's Bank of Canada rate announcement saw the central bank maintain their current policy stance despite the near-term deterioration in the economic outlook, highlighted by the Bank's expectation of negative growth in Q1 this year. read more

Keystone XL drama looks to unfold tomorrow as TC Corp put last minute bid to keep project alive

The deterioration in the risk environment resulted in the loonie posting further losses against the dollar yesterday as the news cycle focused on CBC’s report that President-elect Biden could cancel the Keystone XL project as early as January 20th. read more

Deluge of central banks and political events will give markets plenty of fodder

Over the weekend, Germany’s leading CDU party is set to announce Angela Merkel’s successor, with President elect Joe Biden’s inauguration scheduled for Wednesday. Meanwhile, concerns over a snap election in Italy will persist, especially given the rise in popularity of far-right parties in the polls. read more

UK GDP slips in November as national lockdown measures bite

This morning’s UK GDP release saw the economy contract by 2.6% in November as the government imposed a four-week national lockdown on November 4th, with other devolved governments tightening measures at the margin also. read more

Loonie drives higher as broad US fiscal stimulus bodes well for exports 

Yesterday’s decline in crude oil prices ran out of steam and has seen both WTI and Brent stabilise this morning around $53 and $56 per barrel respectively, offering some support to the loonie after the currency had weakened against its American counterpart during Wednesday’s early trading session. read more

Loonie hit with broad USD strength despite positive data points

Yesterday’s risk-off move sent the loonie tumbling 0.68% against the dollar, despite the Bank of Canada’s business outlook survey highlighting that business sentiment rebounded to above average levels in the final quarter of 2020. Business managers reported stronger sales outlooks, investment and hiring plans, along with tightening labour markets. read more

2021 starts with a bang for FX markets despite muted economic calendar

Despite a relaxed start to the year in terms of economic data, FX volatility was still plentiful. US political events provided much of the impetus for movements in the dollar, as the Democrats win in both Georgia run-offs resulted in the resumption of the reflationary trade. read more

Loonie hit with risk-off vibe as Canada struggles to vaccinate population

Focus over the weekend remained on Covid-19 developments, this time with regards to vaccinations. Despite Canada pre-ordering the most vaccines per capita, it has only vaccinated 0.7% of the population thus far. read more

NFP slip leads to marginal USD weakness, while USDCAD sits stable on similarly poor Canadian data

Private payrolls fell by 95,000, below expectations of a 25,000 increase, while manufacturing payrolls increased by 38,000. With the slip in the net employment data offset by November's revision, the US unemployment rate holds steady at 6.7%. read more

Loonie struggles against resurgent dollar with potentially bleak labour market data released today

The Canadian dollar joined the G10 in retracing some of its recent price action in yesterday’s session as the yield spread between Canadian and US longer-term bonds rose back up to pre-pandemic levels. The loonie was placed under some pressure by the resurgence in the dollar, which wasn’t aided by the latest news of a lockdown in Quebec. read more

Loonie sits near 3 year high as WTI jumps above $50 

The loonie rallied 0.85% in yesterday’s session to carve fresh highs against the dollar as WTI jumped $2.55 and US equities rebounded. The price of WTI crude now sits at $50 per barrel after Saudi Arabia surprised markets with a unilateral cut in output of 1m barrels. read more

Monex Canada January 2021 FX Forecasts

While our medium-term forecast of sustained USD depreciation remains intact, the decline in the dollar in December has led us to revise our near-term forecasts to factor in a weaker dollar heading into January 2021. read more

Firework displays may be cancelled, but Georgia may provide some on the 5th

Many of the 2020 dynamics are set to spill over into 2021. Despite a Brexit deal being agreed prior to the end of the transition period on December 31st, teething problems to the new trading arrangement are likely to persist into early 2021, while an expansion in the narrow trade agreement could draw attention in the New Year. read more

Loonie hits fresh multi-year high as dollar plummets across the board 

The loonie is enjoying the broad USD weakness exhibited in markets today to carve fresh multi-year highs against the greenback in the morning of the European session. Over the Christmas period, little news was announced in Canada that was relevant for the loonie apart from Ontario imposing a province-wide lockdown. read more

EURUSD rally goes beyond general broad dollar weakness

Having surged 5% since the November's lows, we anticipate the EURUSD rally to extend into 2021, with a large proportion of the move to occur in the first half of the year on vaccine optimism and plans to re-open economies. read more

Deal or No Deal: a Christmas special

This week, the data calendar is much lighter after last week’s dump of central bank meetings as markets begin to wind down for Christmas on the 25th. However, a few things still need to get wrapped up before the big day. Firstly, Brexit talks are yet to conclude as sentiment around a possible deal continues to shift. read more

USDCAD volatility drops as the loonie struggles to return to recent highs

The loonie’s rally has seemingly stalled over the last few trading sessions after reaching a fresh two and a half year high on Thursday last week. The US dollar has continued to sell-off, although less dramatically than in previous weeks, suggesting a level of resistance remains in the way of the loonie rally. read more

Brexit, US Stimulus and Central Banks set to deliver volatile last week before Christmas

FX markets have been dominated this week by the return of no-deal Brexit risk and substantial volatility in GBPUSD. With another “final” deadline set for Sunday for negotiations to end, Monday is set to be another explosive day for the pound with many leaders stating that a no-deal outcome is the likeliest option now. read more

Beaudry states BoC’s effective lower bound could be lower as loonie hits fresh high

The loonie struggled to close at its recent high, which is likely due to the Bank of Canada’s Deputy Governor Paul Beaudry. While giving an economic progress report, Beaudry struck dovish tones which we expected in order to soften the loonie’s rally. read more

EURUSD reaches 4-day highs after ECB policy announcement

The ECB did not disappoint today, and delivered a whopping 500bn of additional stimulus to the PEPP envelope, bringing the total amount to 1.85tn. As icing on the cake, the central bank extended the program by 9 months, which is 3 months more than what median expectations foresaw. read more

Economic progress report holds potential for Beaudry to jawbone post BoC announcement

The headwinds to the loonie’s rally may come back into play, especially as the currency now sits at higher levels than before. Focus will very much be on how the BoC conducts its business externally until the end of the year. read more

Bank of Canada unchanged, putting emphasis on Beaudry’s speech tomorrow

The Bank of Canada today left its policy rate unchanged at 0.25%, while reiterating that rates will be held at the effective lower bound until 2023 and the QE programme will continue to be in effect at C$4bn a week until the recovery is well underway.  read more

Dollar retreat threatens to become a rout

It’s been a terrible week for the US dollar, which has fallen to fresh multi-month or multi-year lows against many major currencies, most notably the euro. The narrative that many observers have fit to this price move as a driver has been the progress of a new bipartisan proposal for $908 billion in fiscal stimulus. read more

Another lap of the Brexit headline merry-go-round

Sterling remains firmly on the Brexit headline merry-go-round, and this morning is selling off after assorted anonymously sourced reports indicating that the threat of no-deal Brexit is looming large in the market’s mind for the umpteenth time. read more

CAD rally to resume in 2021 but BoC and economic headwinds may stall the rally towards year-end

We have maintained a constructive view on the loonie for some time now. In our previous round of forecasts back in October, we adjusted our near-term view to factor in US election risks and our view that the dollar would bounce on the basis of a swift result providing constitutional clarity. read more

Markets eye a structural break lower for the dollar

Looking ahead, the outlook for the dollar will continue to be driven by these factors, as well as the newly emerging picture of a global economic recovery in 2021 as vaccination allows wide scale re-opening of major economies. read more

Monex Canada December FX Forecasts

On the whole, these assumptions have held up, and many of our longer-term forecasts remain broadly unchanged in their anticipation of dollar weakness. This view is a consensus among sell-side analysts, although our own calls for dollar weakness in 2021 are more conservative than many, particularly against other G10 economies with dovish central banks and severe domestic Covid-19 situations. read more

RBA and Canada’s budget in focus as dollar decline continues

Tweaks to monetary policy have been the theme of what was a quiet week for markets. Both the Fed and European Central Bank minutes alluded to changes in their monetary policy stance at the upcoming meetings, with the ECB likely to alter PEPP and the Fed likely to attach forward guidance to its QE programme. read more

Markets caught between dismal near-term virus situation and encouraging medium-term vaccine development

Broad risk appetite appears stuck between poor short-term news, with rising Covid-19 cases in Europe and the US, and encouraging vaccine data. Next week’s calendar offers a number of points of interest, including the UK Treasury facing up to this exact trade-off in its latest spending review, and FOMC meeting minutes set for release. read more

Loonie’s rally proves short as rise of cases in the US pose risks for the current account 

The loonie was lifted in yesterday’s trading session as vaccine hopes helped boost risk sentiment which was already well supported on the signing of the RCEP trade deal. The loonie rallied 0.46% open-to-close in yesterday’s trading session, with the only economic development coming in the shape of housing market data. read more

Vaccine euphoria in markets ignores material questions about timelines and distribution

Although the US election remains contested by Donald Trump, this week’s main news was the release of positive data from Pfizer’s Covid-19 trials. Price action in G10 and EM FX has been indecisive, with the US dollar mounting a modest rally against several currencies that has come under threat of reversing on Friday. read more

USDCAD dips below 1.30 handle but the loonie fails to hold on 

The Canadian dollar rallied in yesterday’s session on news that Pfizer’s latest trial of its vaccine proved to be more effective than initially expected, likely because of the substantial jump in crude prices. News that a vaccine in the US that could start to become available as soon as this month has helped lift the global growth outlook. read more

Pfizer results buoy risk appetite in markets

News that a vaccine developed by Pfizer Inc and partner BioNTech proved 90% effective in the first 94 subjects who were infected by the new coronavirus has helped buoy market risk appetite today, prompting big moves in USDJPY, higher-beta G10 currencies such as NOK and NZD, WTI and EM FX. read more

Nervous tone in markets as US election heads goes down to the wire and into the courts

As of the time of writing, the outcome of the US Presidential and Senate elections remains too close to call, although Joe Biden enjoys a lead in vote counting in crucial swing states and short odds in betting markets. It is also probably too early to fit a clear narrative to the market reaction, given that uncertainty about the ultimate outcome remains very high. read more

Loonie rally may start to fade as data calendar is sparse this week

The Canadian dollar ended last week’s session smack bang in the middle of the G10 currency board, rallying over 2% against the dollar – a move that was broadly mimicked by the euro. The loonie’s rally was predominantly driven by the outcome of the US election. read more

CAD labour market gains excel, but markets focus on Pennsylvania result

Today's labour market report was always going to be difficult to unpack. Was the slowdown in the labour market recovery a product of the 28-day lockdown in Quebec and Ontario, or is this part of the natural slowdown in the recovery expected in this phase of the recovery. read more

Loonie thrown around as markets expectations of US election collapse with Florida result

The Canadian dollar wasn’t immune to last night’s wild swings in markets as Donald Trump defied preliminary polls and started to take key swing states, leading to a bounceback in the dollar. USDCAD has already traded in a 1.56% range today at the time of writing, with its trading being driven by the broad USD move on the election outcome. read more

The Risk of a Disputed Election Looms Over Markets

The US election is set to eclipse all other events in terms of significance for financial markets next week, despite the calendar featuring otherwise important events such as Fed and Bank of England meetings, as well as non-farm payrolls.  read more

US election primer

With markets having mostly digested the Federal Reserve’s change in reaction function, and the rout in risk assets of Q1 and Q2 now comfortably in the past, the US election stands out as the second biggest source of uncertainty for global macro markets, after the ongoing Covid-19 pandemic. This is not an ordinary situation. US elections rarely offer such drastic prospects for policy change that they significantly alter the global macro outlook. read more

No surprises at today’s European Central Bank meeting

Today's statement is almost identical to the one released after the September meeting, apart from the first paragraph. In this paragraph, the ECB stated that it will release its new macroeconomic projections with a thorough reassessment of the outlook and the balance of risks in December. read more

BoC and ECB to take center stage before US elections

This week’s major theme has been the ongoing US fiscal stimulus talks between House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin. Headlines around the fiscal funding talks contributed to chopping and changing risk sentiment all week, flinging the US dollar with it. read more

Loonie trades in narrow range despite snap election being avoided

Quebec continues to post over 1,000 new cases a day, while Ontario’s figure still fluctuates around the mid-800s. With little pencilled in for today in Canada, eyes will be on the progress of fiscal stimulus talks in the US and preliminary PMIs from the states which are released at 14:45BST. read more

Risk appetite sours as markets eye a winter of restrictions

This week’s major theme has been a deterioration in broad market optimism about growth and reflation, with the US dollar and back-end sovereign bonds the main beneficiaries of the move. Considering rising coronavirus case counts and the resulting increases in restrictions on economic activity being seen across many western economies, the deterioration in overall risk appetite makes sense. read more

Bank of Canada Business Outlook Survey falls to the wayside

The Overal Business Outlook Survey improved from -7.0 (revised to -6.9) in Q2 to -2.2, but this likely underreports the current situation as it doesn't include the effects of the latest lockdown measures imposed in Canada's two largest provinces; Quebec and Ontario. read more

Ontario case count shows progress over weekend, Business Outlook Survey in scope for loonie today

After six days of recording new cases above the 700 mark, Ontario health officials logged 658 new cases on Sunday. This shows a marked decrease in the number of new cases, bringing them just below the threshold that resulted in the 28-day lockdown measure being introduced. read more

Loonie rally runs out of steam as dollar bounces back 

The loonie rally has started to show the signs of running out of steam as the currency declined marginally for the second day running yesterday despite a rise in oil prices and a broadly declining dollar. read more

Loonie rally stalls at one-month high as demand conditions weigh heavily

After driving higher to sit at one-month highs in yesterday’s session, the loonie witnessed a sharp turnaround in the afternoon session and closed 0.2% lower on the day. Yesterday’s headlines saw consumer confidence data record its largest one week drop in the week ending October 9th since April, reflecting Canada’s two largest provinces, Ontario and Quebec, entering a 28-day lockdown. read more

Loonie struggles to hold onto highs as risk appetite sours

The Canadian dollar continued its recent rally in yesterday’s session, which was relatively muted given North American markets were closed, despite oil falling back below $40 per barrel again and the province of Ontario imposing a 28-day lockdown over the weekend. read more

Counting the cost of the ongoing second wave of Covid-19

It’s been an indecisive week for G10 FX, with the major pairs remaining within recent trading ranges as hopes for US fiscal stimulus faded and several regions continued to report worsening Covid-19 pandemics. Sterling will be in focus next week, with plenty of MPC member speeches and labour market data scheduled ahead of Thursday’s potentially fateful EU summit. read more

CAD feels effects of Ontario lockdown as Canada celebrates Thanksgiving

Markets have opened with a risk-off tone this week as currencies such as CAD and GBP trade lower, while the Japanese yen and dollar continue to rally. Today, Canada enjoys a federal holiday for Thanksgiving. read more

Loonie enjoys employment gains to extend rally

In September, Canada's economy added 378,200 jobs compared with 245,800 in August, bringing the unemployment rate down from 10.2% to 9.0%. Much of the gains were a by-product of loosening containment policies in Canada as the survey was conducted between the 13th and 19th of September. However, this isn't to last. read more

Trump covid-19 infection presents a wild card for markets as sterling goes on Brexit merry-go-round

With less than a month to go before the US election, the possible ill-health of the US President is a uniquely difficult to quantify risk, especially given the highly centralized nature of the administration and the wider GOP political system. read more

Loonie enjoys risk improvement, reversing Friday’s losses

The loonie has started this week higher against the dollar as the greenback begins the week trading softer across the board. Markets continue to focus on the US President’s health after he was admitted to hospital over the weekend following a positive Covid-19 test. read more

Loonie starts to retrace recent losses as the greenback softens

The loonie surged by half a percentage point in yesterday’s trading session as quarter-end portfolio flows tore the US dollar apart in FX markets. In addition to broad USD weakness, the data out of Canada highlighted that the recovery was within 5% of its pre-pandemic level as July’s GDP saw the economy grow 3%  month-on-month. read more

Reality bites sterling as EU remain firm on state aid and and withdrawal agreement

The pound has been hammered this morning by the twin revelations that trade talks have failed to produce a breakthrough on the crucial issue of state aid, and that the EU has prepared a legal response to the Government’s Internal Markets Bill. Sterling is now facing up to the harsh reality of an uncompromising EU stance on state aid and last year’s withdrawal agreement. read more

Canada’s economy expands by 3% in July

Statistic's Canada may have just won this month's forecasting prize as July's GDP comes in at 3.0% MoM, smack bang on their provisional estimate released along with the Q2 GDP report last month. Given that economists' expectations centred around this preliminary estimate quite heavily, today's GDP release caused little market reaction for the loonie. read more

USDTRY hurtles towards the 8.00 level, which may force the TCMB into further aggressive hikes

Even though the lira continues to carve fresh all-time lows on what seems a daily basis, progress has been made in an attempt to stop the haemorrhaging. Last week, the central bank (TCMB) opted to raise interest rates by 200 basis points, with the signal of an interest rate hike more important for markets than the actual hike itself. read more

Covid cases rise and the November election creeps back into the frame as markets begin to favour the dollar again

This week’s price action has had hints of a fear-driven short squeeze as the greenback continued to make inroads against all of the G10 currencies. Differing policy signals were to be found in central bank meetings in New Zealand, Norway, and Sweden, as well as a major speech from Reserve Bank of Australia’s Deputy Governor Guy Debelle. read more

Loonie feels the blow sustained by Trudeau’s fiscal outlay

Yesterday’s throne speech saw these political and credit risks rise to the fore. In combination with the general risk-off tone in markets this week, the speech resulted in the loonie feeling the pressure, extending its slide back towards the 1.34 level – USDCAD is now trading 1.60% higher on the week. read more

Fresh stimulus pledges from Trudeau falls short of political support and stokes fears of fiscal sustainability

The loonie continued to be punished in yesterday’s session as Parliament resumed in Ottawa to the sound of an ambitious fiscal plan from the Trudeau administration. While additional fiscal stimulus previously resulted in the respective currencies strengthening, due to the prospects of a quicker and more robust economic recovery, this wasn’t the case for the loonie in yesterday’s session. read more

JPY gradually advances on the closing gap between the Fed and the BoJ

The BoJ brought no policy moves forward, but took an upbeat tone on the economic outlook. In contrast, the Fed’s move towards strengthened forward guidance moved it a step closer to the BoJ’s ultra-accommodative policy stance, raising the prospect of a structurally smaller difference between US and Japanese yields. read more

G10 central banks and markets mull implications of a new era in Federal Reserve policy

Negative rates will remain a topic of intense scrutiny for markets, particularly after last week’s Bank of England meeting minutes indicated that the central bank was further investigating their effectiveness as a policy tool. read more

Corona-Comeback in Europe ahead of Autumn leaves markets in a stew

Bloomberg reported an emergency UK cabinet meeting to discuss potential increases in restrictions as the UK saw more than 8,000 new infections over the weekend. The Netherlands reported record surges over the weekend while France saw infections increase to peak levels last seen in April. read more

Retail sales may give loonie a shot of adrenaline to break tight ranges

Today, the loonie might find the source of stimulus to break out of its tight trading ranges from the release of July’s retail sales data at 13:30 BST/ 08:30 ET. Expectations sit at 1.0% MoM growth after retail sales bounced 23.7% in the month of June as the economy reopened. read more

Loonie to extend rally on monetary policy divergence but risks are plentiful as the economy enters “recuperation” phase

While the risks outlined in our Q2 report meant that the Canadian dollar lagged the wider G10 rally, with the loonie’s move more concentrated in the month of August as opposed to July like the rest of the G10, the period of USD weakness meant that our previous point forecasts are now overly bearish. read more

EM debt aversion and political risks likely to weigh down the Russian ruble until next year

The Russian ruble is one of the worst performers in the EM space this year, even as oil rebounded by almost 30% after its initial crash at the early stages of the pandemic. Since June, the ruble saw the largest drop among EM currencies apart from the Turkish lira, plunging over 11% against the dollar and over 16% against the euro. read more

Markets face Brexit endgame and packed central bank calendar

The sensitivity of central banks to currency appreciation, discussions of the Fed’s new average inflation targeting framework, and Brexit were the main themes that markets latched onto this week. read more

Loonie weakens as BoC set to ramp up QE in latter part of the year

The Canadian dollar traded on the back foot in the afternoon of yesterday’s European session as US oil inventories rose by 2.033m barrels and the Bank of Canada’s Governor, Tiff Macklem, highlighted that the central bank will step up its QE programme in the coming months. read more

Message received loud and clear from the Bank of Canada

Following yesterday’s rate statement, Governor Macklem today appeared in front of the Canadian Chamber of Commerce to give what was essentially a post statement press conference. read more

Canadian traders return from long weekend to WTI below $40 and a weaker loonie

After enjoying a day off for Labor Day, the Canadian market will reopen today to a marginally weaker loonie. The Canadian dollar sold off 0.34% against its US counterpart yesterday as the greenback broadly rallied against the G10, with the loonie continuing to weaken in this morning’s session. Despite broad USD strength, the slump in oil markets is also driving the loonie lower. read more

Greenback finally catches a break

Two major macro trends were seriously challenged this week, with the US dollar finally managing to stem its losses after weeks of broad declines, and US equities seeing their first major setback since March’s carnage. read more

USDCAD hit by positive surprises in data

It is always difficult to untangle the true driver behind the USDCAD move on Friday's where the Labour Force Survey data is released at the same time as the Nonfarm Payrolls data, and today was no exception. read more

Markets digest major changes to Fed strategy

So far, the upshot of the week’s price action in FX has been more dollar weakness. Developments in fixed income markets were mixed, with the treasury yield curve steepening, while there was a notably sharp rise in breakeven inflation rates, particularly over the widely followed 5 year forward horizon. read more

Loonie records seventh straight week of gains vs USD

The loonie opened the week on a positive note, trading in the green against all of its G10 peers except the Norwegian krone. Friday ended the seventh straight weekly gain vs the US dollar as the US dollar weakened across the entire G10 board, making the loonie streak the longest since 2016. read more

Loonie falls along with oil prices

The loonie dropped along with oil prices yesterday ahead of Bank of Canada Senior Deputy Governor Carolyn Wilkins’ speech at a workshop on the renewal of the BoC’s monetary policy framework. Wilkins mentioned in her speech that the Bank is reviewing various frameworks, as well as the monetary policy framework. read more

Loonie unmoved despite oil rally

The loonie remained relatively flat this morning, floating in the middle of its recent range and ignoring yesterday’s rise in oil prices. Both WTI and Brent hit a 5-month high as Hurricane Laura bore down on key refining facilities on the US Gulf Coast. read more

Risk sentiment boosted amid progress on phase one talks

The greenback fell against most of its G10 peers after news reports that US and Chinese trade negotiators discussed the phase-one trade deal on Monday evening, with the US saying that both sides agreed to create conditions to save the deal. read more

Dollar stabilises at the end of the week, but fireworks may be in store next week with the Jackson Hole symposium scheduled

The narrative of dollar weakness seemed to be the status quo this August, but the greenback managed to steady itself over the last week. A less dovish than expected set of FOMC meeting minutes provided a level of support for the dollar, despite growing concerns about the US economic recovery. read more

Loonie rally continues as Freeland announced as Fin Min 

The loonie currently sits at levels not seen since January, marking highs not seen in over six months, as we argue the Canadian dollar plays catch-up with the broad G10 rally. On top of Freeland’s appointment as Finance Minister, Prime Minister Trudeaususpended all parliamentary business until September 23rd. read more

Morneau leaves but loonie continues to rally

At around 7:30 pm eastern time yesterday, Finance Minister Bill Morneau held a press conference in Ottawa to announce his resignation from Trudeau's cabinet and his position as a member of parliament. The loonie barely flinched at the announcement and, in fact, extended its rally against the dollar to touch highs not seen since January. read more

TCMB walks the tightrope, will the dollar’s retreat slow?

FX traded with a tentative risk-on tone this week, with the dollar seeing losses to most of the G10. Euro periphery currencies such as NOK, SEK, CZK and PLN all saw noteworthy performances, consistent with improving sentiment about the region’s growth prospects. read more

Loonie leads G10 ahead of Trudeau-Morneau meeting as net short positions rise

The loonie touched its highest level since January 31st last week but failed to hold onto its gains, which have lagged most of the G10 since the outbreak of the virus. This morning, with the US dollar broadly weaker across the G10 space, the loonie is back on the offensive. read more

Crisis Man Carney could replace Morneau as speculation rises

It is reported that Mark Carney, former Bank of Canada and Bank of England governor, is an informal confidente of Prime Minister Trudeau's, only adding fuel to the rumours that Bill Morneau's time could be up in Trudeau's cabinet ahead of Parliament reconvening in September.  read more

Battered dollar stumbles through August as Turkish authorities face tough choices

It may be a quiet start to the trading week, but things are set to pick up on the data front as UK GDP and labour market figures, RBNZ and Banxico rate decisions are all on the economic calendar. Here's a closer look at the week ahead in FX. read more

Dollar smile becomes a dollar smirk… 

The dollar has weakened in recent weeks and months, due to a potent confluence of factors including a uniquely bad COVID pandemic, a febrile political landscape, and anticipation of the FOMC delivering a lower US yield curve for well into the future. read more

Non-Farms cap busy week of data

Covid cases rising in parts of Europe, Tokyo and Victoria could prompt the dollar to find support from the risk environment deteriorating in a broader sense as opposed to risks being isolated to the US economy. While the progression of Covid is monitored closely, key data points such as Nonfarm payrolls, central bank meetings in Australia, Brazil, the UK and India and eurozone retail sales are in focus. read more

Rand recovery to stall in new range with rally tilted towards H121

Amid capital outflows reminiscent of the 2008-09 financial crisis in early Q2 due to the outbreak of Covid-19, the South African rand hit a record low of 19.3540 against the dollar in early April. While the rand has recovered over 13% from its April low, it still remains over 5% weaker than the pre-virus levels seen in February. read more

Attention turns to a stalled US recovery in Q3

The 32.9% annualised Q2 contraction is the starting point for what will be a long and potentially lagging recovery for the US economy, especially when compared to peer economies facing more contained coronavirus epidemics read more

EURUSD reaches two-year high ahead of FOMC meeting

The euro is ranked as the best performing G10 currency against the US dollar over the course of the last two weeks after it broke through the 1.14 level on July 14 for the first time in over four weeks. read more

USD calendar in focus after greenback takes battering

This week’s dollar weakness was a tale of two halves. The week started off with fresh fiscal stimulus announced by the EU in the form of the €750bn recovery fund, which buoyed market sentiment and led to a risk rally. read more

Loonie continues to take cues from broad dollar weakness

The loonie has continued its positive momentum in this morning’s session as broad dollar weakness continues in markets. The Canadian dollar is up over 1.3% this week as things stand, while WTI is trading back up above $42 a barrel, its highest level since early March. read more

CAD takes cues from USD move as inflation ticks up

The Canadian dollar continues to focus on how its US counterpart trades this morning as its rally stops short despite a positive inflation read. Higher shelter, gas and elevated food prices helped the headline CPI index rebound from negative territory in June, posting a 0.7% YoY rise vs -0.4% in May. read more

USDCAD breaks out of post-Fed range as USD is routed

The Canadian dollar has just broken out of its post-Fed range, where the currency pair traded for 27 consecutive working days. The impetus behind such a move isn't as clean cut as one would like, but comes from general dollar weakness over the last two days. read more

PMI reality check looms for major economies

Familiar themes were the focus of attention for FX and macro markets this week, as the dollar continued to lose ground at a modest pace, US-China tensions escalated further, and China Q2 GDP handily beat expectations. Risk appetite on the whole has remained intact, despite a curious midweek fall in Chinese equities that did not result in a global rout.  read more

Loonie struggles to break out as oil markets face a second wave demand shock

Despite the increased stimulus aimed at limiting the scarring to Canada’s labour market, a sluggish oil price is weighing on the dollar. The plethora of localised lockdown measures about to be announced in places like Rome and Los Angeles are adding to concerns over another demand shock. read more

BoC reactive: How long is a piece of string

Tiff Macklem's first press conference and Monetary Policy Report as Bank of Canada Governor went without a hitch today, mainly because nothing was really announced. Forward guidance was what the market wanted coming into this monetary policy meeting and with the MPR shifting from two illustrative scenarios to a central scenario more akin to point forecasts. read more

Loonie struggles to fight off dollar move as it heads lower on deterioration in risk

The loonie failed to hold onto its marginal gains in yesterday’s session as the risk climate soured and the dollar went bid across the board. read more

China Q2 GDP marks blockbuster calendar

This week’s busy data and event calendar offers multiple opportunities for both idiosyncratic moves in individual currencies, which will be influenced by the trajectory of the global coronavirus pandemic itself, especially in the US. read more

Loonie brushes off OPEC+ risks ahead of big BoC meeting on Wednesday

The loonie remained relatively stable this morning, floating in the middle of its recent range, despite oil starting the week lower ahead of the OPEC+ meeting on Wednesday. This week, focus for the loonie will be on the upcoming Bank of Canada meeting, where a central forecast scenario will be outlined. read more

Canada adds close to 1m jobs without even capturing Toronto’s reopening

Canada added 952,900 jobs in June, with the survey period resting between June 14th and June 20th meaning Toronto's re-opening on the 24th, suggesting the job gains could have been even more. read more

Fiscal snapshot gives transparency to markets

Finance Minister Bill Morneau's fiscal snapshot this afternoon has helped extend the loonie rally as the dollar broadly weakens towards the back-end of today's session. Additionally, the Canadian government bond curve bear steepened as issuance numbers are set to rise at unprecedented rates; the 30Y yield rose 7.68bps vs the 1.5bp rally in the 2-year yield.  read more

Loonie not impressed by BoC Business Outlook Survey

The loonie steadied near a two-week high against the dollar ahead of the Bank of Canada Q2 business outlook survey and was little changed after the survey was released. The quarterly business outlook survey helps guide monetary policy decisions as it provides a good anecdotal account of conditions in the real economy. read more

Confusing data, Yield Curve Control and Canada’s fiscal “snapshot”

Speaking at a daily briefing in mid-June, Prime Minister Trudeau announced that the government will release a fiscal “snapshot” on July 8th in lieu of the more extensive budget that was scrapped on March 30th due to the impact of Covid. read more

Empty-handed BoJ to set the tone for a mildly strengthened JPY

USDJPY pair has remained broadly range-bound after central banks aggressively intervened to stabilise financial markets. Looking forward, our FX market analysts expect the yen to continue trending to the upside against the dollar, while the trading ranges remain tight. read more

Sterling is not an EM currency – But pre-Brexit exchange rates remain a distant dream

Our FX Analysts discuss how sterling is likely to rally with the rest of the G10 against the US dollar as the global economy undergoes a gradual and inconsistent re-opening. read more

Loonie lost for direction as US breaks for weekend

Canada day on Wednesday and a US holiday today means an extended holiday for most in North America this week, which could potentially cause a quiet afternoon session in markets. read more

Canada GDP: The worst economic monthly contraction on record

The relative accuracy of the median forecast and the positive advanced Canadian May GDP reading, meant that the currency market passed the release by in a risk-off session that would have lapped up a negative surprise. read more

US Covid curve steepens, dollar to rise or fall?

If the US economy underperforms its global peers in Q3 due to a severe domestic second wave, will the dollar continue to strengthen on haven demand? With FOMC minutes and US jobs data out this week markets will have plenty of impetus to ponder the question. read more

Will binary risk on, risk off dynamic weaken?

For much of May and June, broad moves in risk sentiment have dominated major FX pairs, with the US dollar strengthening during risk-off periods and weakening as risk appetite improved. As a result, the broad dollar’s performance has traded with an inverse relationship to US equities. read more

CAD unmoved by this morning’s events

The Canadian dollar barely flinched at this morning's data releases. Neither the drop in headline inflation in May nor the OPEC June market report pushed the loonie away from trading flat on the day - just below the $1.355 level against the dollar. read more

Loonie slightly higher with Macklem to face the Finance Committee for the first time later today

The loonie’s mild rise continues in this morning’s session as risk appetite remains buoyant with the Fed’s measures set to begin today. The only noteworthy event on the calendar is BoC Governor Tiff Macklem’s first public outing as the new governor is set to face the Finance Committee at 20:00 BST. read more

The BoE to step up QE firepower amid looming economic risks

Since the beginning of June, sterling has taken a leg higher on the back of improved global risk sentiment amid easing lockdown measures and economic resumption. The currency rallied for 10 consecutive days against the USD to a three-month high, the longest rising streak since 2012. read more

Loonie drops as risk appetite ebbs and crude prices fall

The loonie climbed amid broad US dollar weakness yesterday as markets were focused on the Federal Reserve’s policy statement, but the currency was trading on a weaker footing this morning after the FOMC’s gloomy economic forecasts triggered a risk-off move across markets. read more

Loonie resists depreciation against the USD despite concerns of oversupply in oil markets

With the dollar remaining on the back foot ahead of the FOMC policy announcement, the Canadian dollar managed to regain some of its lost territory this morning despite revived oversupply concerns in the oil market which caused WTI to drop back towards $37/b. read more

Crude oil prices saw another bout of strength following OPEC+ headlines

Crude oil prices surged to three month highs on the news that OPEC+ will meet on Saturday to discuss extending output cuts until the end of July. The news came after a week of mixed headlines in which OPEC+ first wanted to meet earlier than the planned June 9th-10th meeting to discuss potential extensions on output cuts. read more

Loonie finds support in OPEC+ output cut extension 

This morning saw another bout of loonie strength as oil prices rose yet again after OPEC+ producers extended the output cuts through July over the weekend in order to boost prices. The cartel also secured commitments from Iraq to make good its missed targets from the past months and improve compliance. read more

BoC briefly sends the loonie on a rally against USD after keeping rates unchanged

The Bank of Canada today kept the target for its overnight rate at the effective lower bound of 0.25% and scaled back some of its market operations. The bank stated that the economic turmoil caused by Covid-19 "appears to have peaked, although uncertainty about how the recovery will unfold remains high."  read more

Loonie breaks out of post-Covid range but the sustainability of the rally is faced with a multitude of risks

With social consumption collapsing, unemployment set to increase to levels above 2008-09, and the oil market in a state of tatters, the aggressive coordinated stimulus response from the Bank of Canada and Trudeau administration failed to prompt a recovery in the loonie. read more

ECB is set to recharge batteries once again

The ECB is widely expected to bring further action in its next policy meeting on June 4th. In the April meeting, the ECB reinforced its readiness to increase the size and flexibility of the €750bn PEPP launched in March. read more

National People’s Congress drop GDP target but Hong Kong bill destroys markets risk appetite

With tensions rising again between the US and China after the Senate passed a bill to restrict semiconductor trade with Huawei, the latest measures taken by Beijing could see another collapse in US-Sino relations. read more

Loonie finds support in improved oil markets and increased risk sentiment

The loonie spent another day in the green against the dollar as it is riding on the coattails of slowly improving dynamics in the oil market and an improvement in risk sentiment. Today, WTI rose back above $34 a barrel while Brent is trading above $36 a barrel after Russia published a promising forecast on the market rebalancing. read more

Loonie joins G10 move despite oil dynamics

The loonie failed to capitalise on WTI’s continuing rally yesterday, with the currency falling 0.4% against the dollar despite oil climbing to its highest point since early March at $34.66. read more

Loonie continues to trade in line with G10, despite oils rise 

Rallying oil prices helped the loonie maintain its gains too as late in the session the Department of Energy released data that showed US inventories fell by 4.98m barrels. WTI now sits above $34 per barrel, its highest price since mid-March. read more

USD weakness continues as G10 makes inroads

Broad US dollar weakness has been the theme of this week’s trading thus far. The loonie shrugged off a -0.2% CPI reading this afternoon, focusing more on the broad G10 rally and positive DoE inventory headlines. Inflation was dragged down by the collapse in oil markets. read more

Loonie looks to Department of Energy release as CPI likely to be a dud event 

The Canadian dollar pounced on a softening dollar and higher oil prices yesterday to reach the top of its recent trading range. Also in the calendar for CAD today is April’s CPI data at 13:30 BST, with expectations of headline inflation falling to 1.9%, while the Bank of Canada’s Tim Lane gives a speech tonight at 19:00 BST. read more

G10 in Green as Powell and Mnuchin head to Capitol Hill

USD is lower against most major currencies today, with JPY the sole loser among the G10. The week’s biggest news so far remains yesterday’s proposal for a mutual Eurozone recovery fund by the German and French Governments. read more

Negative rate expectations in focus as central banks prominent for the week ahead

The US dollar has remained well bid this week, consistently reaching new highs against GBP, CAD and NZD, while also managing to make some progress against most major other currencies. read more

Dollar weakens despite another phase of US-China trade war looming

The dollar continues to trade weaker in today’s session despite news of rising US-Sino tensions after the US imposed restrictions on semiconductor sales to Chinese telecommunications company Huawei. read more

Loonie climbs as oil breaks $30 during Canadian bank holiday

This week, global oil output cuts are starting to take their toll on benchmark prices, with WTI back up above $30 this morning while Brent crude trades at $34. OPEC+ is well on the way to slashing 9.7m barrels a day just two weeks into its new deal. read more

Loonie heads back to 1.40 after BoC give banks thumbs up

The loonie bounced back 0.36% against the dollar yesterday, reversing all of Wednesday’s losses along with some of Tuesday’s. Yesterday saw all six of Canada’s biggest banks pass severe stress testing by the Bank of Canada under its Financial System Review, which was devoted to the Covid-19 crisis. read more

Negative rates and Trump-China chat put markets on edge

The dollar has remained on the offensive today, as central bankers focus on managing increasing speculation in financial markets that major central banks such as the Fed and BoE may be forced into negative rates, and President Trump has made a series of comments suggesting a heightened risk of renewed tensions with China. read more

Loonie tarred with confusing oil move

The loonie spent most of yesterday’s session in the green until a shock slide in oil markets sent it back to lower levels. The shock in oil pricing wasn’t because of a catastrophic fall, but instead because WTI weakened after the Energy Information Administration reported a 745,000 barrel fall in inventories – the first drawdown since January. read more

UK GDP data shows early signs of damage while the Fed is back in focus

UK macro data in Q1 brought a modest unexpected boost to the pound, as the figures showed a relatively more resilient economy than expected amid initial coronavirus shock. Despite the initial positive surprise in the headlines, investors are left with a grim picture. read more

Loonie drops as pressures restrict a breakout

The loonie struggled to hold on yesterday as it fell half a percentage point against the greenback. Most of the loonie weakness came at the back-end of the session, despite oil rising to recent highs above $26. read more

FX trades with nervous tone amid fragile risk appetite

G10 FX has traded with a nervous tone so far this week, as yesterday’s broad dollar strength has given way to selling today, with price action following a roughly “risk on” pattern. read more

USDCAD back above $1.40 as loonie struggles to breakout of recent range 

WTI futures for June delivery have remained stable above $20 a barrel for six sessions now. Extra support was reinforced yesterday as Saudi officials stated that the oil-producing nation would unilaterally cut an extra 1m barrels per day in June. read more

Dollar gains momentum amid fragile risk sentiment

Risk appetite is still looking fragile today, after the US dollar has rallied from an early-morning sell-off. Among the G10 currencies NOK and CHF are the best performers. Re-opening is likely to be a major theme for this week, as a number of G10 economies and US states either consider or implement lockdown easing.   read more

Will the RBNZ go negative?

Since the Reserve Bank of New Zealand's last formal Monetary Policy Statement in February, the Bank has engaged in a full suite of crisis response measures, similar to those undertaken by the Federal Reserve, RBA, and Bank of England. read more

Widespread recovery of the loonie takes USDCAD to 1-week low

Crude oil markets recovered by double-digit percentages last week, allowing the loonie to rally alongside. This morning, the loonie continued to edge higher against USD along with the Norwegian krone and Australian dollar as increased risk sentiment continued to drive markets. read more

Loonie sits in the green but that may not last with labour market data due later

Today, the Canadian dollar faces one of its biggest challenges to date – the April Labour market report. March’s release, due to the timing of the implementation of containment policies, didn’t fully incorporate the overall impact that COVID-19 had on the labour market. read more

Loonie finds support in improved risk sentiment

The loonie’s strength is likely stemming from a general risk move as other currencies in the G10 basket trade accordingly in line with a weaker dollar and improved risk sentiment. read more

Euro struggles amid poor EC forecasts, ongoing ECB legal drama

Today’s headlines are marked by the ongoing story of the German Federal Constitutional Court’s ruling that the European Central Bank must provide justification for its QE program within three months. read more

Loonie looks beyond oil to test 1.40 again

Yesterday saw another bout of loonie strength as oil prices rose yet again. WTI closed out yesterday’s session at $24.56, its highest level since early April, while the loonie also enjoyed improved economic conditions to rally near 0.5% on the day. read more

German constitutional court ruling casts shadow of doubt over ECB

The euro is among the worst performers in the G10 today, after Germany’s top constitutional court ruled on a suit against the ECB. The German Federal Constitutional Court ruled in a 7-1 decision that the ECB had not violated treaty prohibitions against monetary financing, which were the core of the claim. read more

Risk aversion continues to drive markets on renewed US-China tensions

With the global economy sitting in a fragile state due to the impacts of COVID-19, news from Europe that Italy will ease lockdown measures for manufacturing and construction sectors starting today would normally equate to a brief euro rally. read more

April labour market reports in focus for USD and CAD next week

Last week’s North American data calendar was centered on the US, with the FOMC and first reading of Q1 GDP being the standout events. However, both events proved to have a limited market impact. The week ahead for both the dollar and loonie focuses on the highly anticipated April labour market reports set to be released at 13:30 BST on Friday. read more

Tiff Macklem announced as next BoC Governor

Former Senior Deputy Governor (2010-2014) Tiff Macklem has been announced as Governor Stephen Poloz's successor, effective June 3rd. The appointment of Macklem blindsided spectators somewhat as his bid went under the radar with current Senior Deputy Governor Carolyn Wilkins and former BoC member. read more

Loonie on the back foot with Poloz’s successor set to be announced

After touching a six-week high in yesterday's session, the loonie sharply retraced its gains to sit lower against the dollar at close. There were multiple avenues to search for the reversal in the CAD rally, such as a flat February GDP reading which undershot expectations of a mild 0.1% rise. read more

Quiet G10 session sees dollar weaken further as ECB steps into gap left by European leaders

The ECB is stepping up to the plate this afternoon, after a morning of poor eurozone data releases that highlighted the scale of the shock facing the eurozone economy. read more

Ongoing recovery in crude oil lifts the loonie to a 2-week high

The Canadian dollar spent another day in the green against the dollar as an ongoing recovery in crude oil prices and a pro-risk mood supported the loonie. Combined with the general trend of dollar weakness following the US GDP report and the Fed’s meeting yesterday, this kept the loonie on the offensive around 2-week lows on USDCAD this morning. read more

USD continues to trade on backfoot after negative GDP reading with FOMC in scope 

Today marks the beginning of this week’s data calendar for the US, with the advanced reading of Q1 GDP and the first Federal Reserve meeting since rates were lowered to the zero lower bound in successive inter-meeting announcements in March. read more

Loonie drives below $1.40 on a weak dollar ahead of key US GDP reading

Today, with risk sentiment well supported again, the Canadian dollar is rallying again, marking its third consecutive day in the green as it sits up over a percentage point against the dollar thus far this week. read more

USD hammered amid broad risk-on move

July and August WTI contracts are both up more than 2% on the day, suggesting that for now markets, are happy with a $20-30 clearing price for crude futures and there are no new concerns of another serious leg lower for US crude prices. read more

APAC news causes risk rally in otherwise quiet markets

Little has changed from this morning’s session as markets still trade off of headlines that the Bank of Japan will increase their QE program, Australia will begin to relax lockdown measures, and the worst affected European nation’s eye exit plans. read more

Loonie likely to stay range bound despite oil market as industry already in tatters

The Canadian dollar’s lack of volatility last week relative to that seen in crude markets and other petro-currencies supports the idea that the economic implications of marginal moves in oil at extreme price levels is limited. read more

Loonie lagging in risk-on rally as oil markets take another dip

The loonie is struggling to jump onto the back of the G10 risk rally today as oil markets continue to slide. While the Canadian dollar still sits in the green this morning, its rally is muted compared to that seen in the Antipodean currencies and sterling due to WTI stilling 13.4% lower this morning. read more

COVID-19: Global Policy Responses

Since the outbreak of the coronavirus in late December, COVID-19 has rapidly spread across the globe with nearly 3 million cases confirmed.  With this in mind, we have kept a track of all of the fiscal and monetary measures put in place by governments and central banks in the G10 since the onset of the virus. read more

PMIs in focus as markets gauge economic toll of COVID-19

Yesterday saw the release of March’s CPI data which saw headline inflation drop from 2.2% to 0.9%, its biggest one-month drop in annual inflation since 2006. Much of the decline was due to a collapse in gasoline prices as CPI excluding energy was 1.7%. read more

US dollar weakens as Emerging Markets leads advances

While oil markets continue to draw the focus of markets today, risk sentiment has improved dramatically. In the G10, GBP and AUD lead the way in reclaiming ground lost earlier in the week while the dollar softens across the board. read more

Oil slide more widespread keeping USD well bid

Dynamics in oil markets continue to dominate FX market pricing today. After yesterday’s headline-grabbing slide in WTI, which saw May delivery prices dive deep into negative territory, oil markets remain on the back foot and with more meaningful consequences for FX. read more

The collapse in WTI prices did little to cause a rout in the loonie

Western Canada Select oil, from Canada’s oil sands, actually rallied to $9.22 a barrel yesterday after dipping below $5 last week. While the Canada specific benchmark usually trades at a discount to WTI due to its lesser quality. read more

NZD enjoys boost on easing of lockdown measures

This weakening of binary risk on/risk off dynamics may create trading conditions in G10 FX more conducive to idiosyncratic drivers such as economic and virus data. read more

A week of data beckons as markets weigh how long “risk on, risk off” dichotomy can dominate FX

Broad risk-on/risk-off moves have dictated FX price action for the past few weeks, with the US dollar strengthening with deteriorations in risk appetite, and weakening with improvements. read more

More stimulus measures announced to help V-shaped recovery

The bank’s commitment to providing growth stimulus and therefore supporting a V-shaped recovery was reiterated by the government yesterday as well. Prime Minister Trudeau unveiled the Canada Emergency Commercial Rent Assistance program. read more

US Job claims suggest COVID-19 wipes out financial crisis recovery

Today’s jobless claims data from the US saw another dramatic rise in the number of unemployed persons claiming insurance benefits. The 5.245m number of claims registered in the week ending April 11th has seen the aggregate number of job losses, if this is a true measure, erase the employment gains made since the global financial crisis. The data followed a 6.62m increase in claims the week prior, pushing the four-week sum to 22m filings compared to the 21.5m jobs added during the economic recovery beginning June 2009. The US dollar has gone mildly bid in markets following the release as risk sentiment continues to drive market pricing. However, despite today’s data highlighting a dramatic collapse in the US labour market, with the advanced seasonally adjusted unemployment rate rising to a record high of 8.2% for the week ending April 4th, it isn’t necessarily an accurate representation of the real economy. Below, we highlight some of the reasons for this which include; the loss of output from those leaving the job market altogether therefore not claiming unemployment benefits, system failures in states, backlogs in processing and the impact of the CARES act. State data for week ending April 4th: Georgia (+256,312), Michigan (+84,219), Arizona (+43,488), Texas (+38,982), and Virginia (+34,872) saw the largest rise in claims. California (-139,511), Pennsylvania (-127,037), Florida (-58,599), Ohio (-48,097), and Massachusetts (-41,776) saw the largest falls in claims. A note on US Jobless claims in general The US Jobless claims figure has been one of the most contentious data points during the coronavirus outbreak. While the data is one of the timeliest metrics to assess the impact lockdown measures are having on the US labour market, in turn allowing markets to gauge the effects on consumption and therefore growth, it is subject to a number of quirks. The quirks make it hard for economists to filter through the noise and truly measure the economic impact of social distancing measures in the US via the labour market, but given the lack of timely data markets will still use this as their best nowcast of the US economy. This means that initial jobless claims are likely to continue having an elevated market impact as more accurate unemployment data is compiled. Last week, the initial jobless claims data release saw the number of people claiming unemployment benefits in the week ending April 4th dip trivially to 6,606K from an upwardly revised 6,867K the week prior. The dip in jobless claims was concentrated in Pennsylvania (-143K), Florida (-108K) and Massachusetts (-103K), but recent reports in the Washington Post highlight that the benefits system in states like Florida has led to the state underreporting the true number of claims. Rebecca Vallas reported that the red tape surrounding the state claims system was deliberately designed by the former Governor Rick Scott to “make it harder for people to get and keep benefits so the unemployment numbers were low”. This is supposedly just the tip of the iceberg. System failures nationally have arguably suppressed the true number of new unemployment claims. Reports of system crashes in New York, Michigan and Nevada are also backed up by reports of increased server capacity nationally and extended call center hours beginning next week. The influx of claims and the current backlog suggests that the initial claims data will remain elevated for some time to come as opposed to seeing the data subdue and a corresponding rise in continuing claims. Additionally, the CARES act will now see more claims fall under the official data stemming from unemployment benefits being paid to self-employed and gig economy workers. With the widening criteria of claims, expect the nominal number to remain elevated in the numerous millions for some weeks to follow. While the multitude of factors in play makes it harder to assess the true economic damage, further drawbacks are found in the fact that the claims data doesn’t measure the loss of economic activity from those leaving the labour market all together. In the March household survey, approximately 60% of workers that lost their job were counted as no longer in the labour market because they didn’t want a job or were not looking. Additionally, the structural contraction in the economy is difficult to assess due to the amount of temporary claims crowding out the true structural unemployment rate. Markets know the short-term contraction in the economy is set to be sharp but much of this can be recovered once containment measures are relaxed. The concern is what the longer-term impact to the economy is and to measure that, and in turn the effectiveness of the stimulus measures to counteract it, markets will need to see the noise around the labour market data to subside. While containment policies are in place, the data will continue to be marred with noise and only reflect the short-term economic impact, but it remains the best and most timely measure of economic activity for now. Eurozone Industrial Production data fails to move euro This morning’s eurozone industrial output data from February included a sharp contraction of 1.9% on a year-on-year basis and a 0.1% contraction month-on-month, with a decrease in capital and durable goods causing much of the slump. The month-on-month slump is negligible due to the increase in intermediate and non-durable consumer goods, as well as energy production. The data was already hampered in February as the virus had China under lockdown, causing many disruptions in supply chains of trading partners, including the eurozone. With eurozone countries following nationwide lockdowns in March, a sharp downturn in the next data release is a given. Reasonably encouraging purchasing managers’ indices from March suggested on the surface the slowdown was particularly sharp, but the PMIs were subject to noise from the inverse effect of the supply delivery times. With some eurozone countries looking at options to gradually revive the economy again, an important question that arises is when factories and companies will resume production. Germany has already announced plans to ease some of containment measures at the beginning of May and will reopen some smaller shops, while Spain will allow workers in manufacturing, construction and some services to return to work from this week onwards. The rest of the Spanish population remains in lockdown. The moment at which countries resume production will be the largest factor in assessing what the lowest point of production will be and will pave the way for a recovery in the eurozone industry. The reaction in FX markets to the data remains limited… As markets are mainly concerned with the shift in risk sentiment that has appeared since this week’s collapse in oil markets and renewed safe haven demand for the US dollar. The euro has weakened against the dollar throughout the day, including the moments after the data release, but remained relatively stable against Sterling, signalling that this story is a matter of dollar strength rather than euro weakness. Looking ahead, industrial production data for March and April, combined with the timing of the easing of containment measures will be key in determining the bottom eurozone’s industrial downturn.   Eurozone industrial production vs surveyed values   Eurozone industrial production February 2020 (Covid Crisis) vs January 2009 (GFC)   Mexico’s rating erosion will make it harder for the peso to recover The ratings agency Fitch downgraded Mexican sovereign debt to BBB- from BBB yesterday, just one notch above speculative investment grade, with a stable outlook. The downgrade comes after the coronavirus crisis has dampened the already grim outlook of the Mexican economy and its public debt outlook. The agency now foresees an economic collapse of at least 4% in 2020, while pushing prospects of recovery back to 2021. Despite the fact that the government has not enacted any additional fiscal measures to rescue the economy amid the coronavirus crisis, the economic fallout could represent an increase of the primary deficit as percentage of GDP of some 2.5pp to 4.4%. In turn, this could push the debt-to-GDP ratio above the 50%, a record not seen since the 1980s. Fitch is the second major agency to cut Mexico’s sovereign debt rating in less than a month, after S&P downgraded it to two notches above junk at the end of March. The country is extremely sensitive to further downward revisions by major agencies despite AMLO’s austerity stance, as structural growth could be impacted for years to come. According to the OECD’s PPP standard, the Mexican peso is currently undervalued by nearly 160%, while the currency has lost over ¼ of its nominal value in less than two months. Even if USD strength starts to ease in the following quarters worldwide, poor domestic fundamentals will hardly help the peso to recover towards its pre-coronavirus levels in the short-to-medium term horizon.   Mexican debt-to-GDP ratio is set to jump to above multi-decade levels amid coronavirus economic collapse     Authors:  Simon Harvey, FX Market Analyst Olivia Alvarez Mendez, FX Market Analyst Ima Sammani, FX Market Analyst     This information has been prepared by Monex Canada Inc., an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Inc., or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. read more

BoC widens range of asset purchases to boost liquidity and credit conditions

The reference made to increasing federal and provincial debt issuance to finance the fiscal spending packages may have been a wink and a nudge to markets, suggesting the large scale asset purchases may be in place for some time and are likely to be expanded in the coming months. read more

Bank of Canada adds to its playbook to improve transmission

The latest swathe of Bank of Canada measures sees the Governing Council continue targeting the functionality of markets and aiming to improve the transmission mechanism of policy rates as opposed to adding to its balance sheet to directly improve growth conditions. read more

USD rips higher as OPEC+ cuts insufficient to stem global glut

The dollar is broadly higher this morning after risk appetite soured as falls in crude oil prices accelerated. JPY is dominating G10 FX along with CHF, while EM currencies are mostly in the red. read more

Bank of Canada policy announcement to focus on Quantitative Easing depth and time frame

Tomorrow’s Bank of Canada meeting is unlikely to be as dramatic as expected at the beginning of last month after a string of inter-meeting rate cuts in March saw the overnight lending rate fall by 150bps and the policy rate hit its effective lower bound. read more

Risk appetite continues to improve after Eurozone and OPEC deals, fresh Fed measures

Markets traded with a relaxed tone this morning, characterised by a modest but continued recovery in risk appetite and easing financial conditions, accompanied by a weaker US dollar. read more

USD falls amid Fed credit measutes, OPEC+, Eurogroup

The dollar is lower this afternoon, after the Fed announced a raft of aggressive new credit easing measures. On the whole it seems global macro markets are no longer trading in a binary “risk on, risk off” dynamic – this suggests risk appetite on the whole has improved, for the time being. read more

Survey period saves Loonie as OPEC+ headlines eyed before bank holiday

For the second time this week, the loonie has been rescued by the survey period failing to encompass the severe impacts containment and social distancing policies are having on the real economy.  read more

Eurogroup failure sees ominous tightening in European interbank funding markets

European finance ministers failed to reach an agreement on a response to the virus pandemic after a marathon 16-hour conference call that went through last night. read more

Loonie swung by global risk sentiment as oil anchors down ahead of key OPEC+ meeting

Today, markets get to see the Department of Energy’s release which should limit any upside in oil barring any OPEC+ headlines ahead of tomorrow’s teleconference meeting. read more

Risk-on returns as investors eye signs of coronavirus slowing

While the number of fatalities and new confirmed cases continues to pile up, the daily change in both figures have shown consistent evidence that the pandemic curves could be somewhere near to peaking. read more

BoC Business Outlook Survey a dud due to survey window

Today's release of the Spring Business Outlook Survey by the Bank of Canada could have been a game-changer for the loonie. If it highlighted a significant collapse in social consumption along with a dramatic decline in businesses CAPEX and hiring intentions, USDCAD would have likely screeched higher in a dramatic fashion. read more

FX trades with mild risk-on vibe amid signs of virus stabilization

G10 and EM FX are trading with a broad risk on vibe this afternoon, with the dollar lower against AUD, NZD, NOK and CAD, and enjoying some modest gains versus JPY and EUR. read more

US dollar pares losses – but no sign of March madness despite week of awful data

The US dollar is broadly higher this week, but at this point, it looks like a recouping of some of last week’s sell-off, as opposed to the beginning of another leg of intense dollar buying of the sort seen in mid-March. read more

Trump tweets send oil skyrocketing

Donald Trump has sent oil prices and petro-currencies soaring after saying that he hoped Saudi Arabia and Russia would agree to oil production cuts of 10-15m barrels. read more

Sky-rocket US jobless claims dictate FX dynamics today

The USD narrative for today’s price action, however, seems somewhat tainted by recent developments in oil markets leading to the recovery of some currencies; and broad negative sentiment for the release of the US jobless claims in the last week of March. read more

NOK and CAD rise as oil jumped on China’s purchase plan

While both the krone and CAD are benefitting from the oil rally, the Norwegian krone is leading in the G10 space. NOK's faster recovery compared to the Canadian dollar shows that while oil has been the main character in today's gains. read more

Trump continues Open Mouth Operations aimed at crude oil markets

The loonie has traded within a broad but stable range against the US dollar this week, strengthening overnight as crude oil prices continued to react favorably to jawboning from US President Donald Trump. read more

No one knows what to do with the dollar

The dollar remains bid today, despite a period of relative calm in bond markets, financial conditions, and USD funding markets. This suggests that the dollar strength we have seen this week is not panic buying, but simply a steady demand for greenbacks after last week’s sell-off. read more

Markets might get used to ugly data for a while

G10 FX has had an eventful day so far, with the US dollar remaining bid and up against the whole G10 except for NOK. NZD and AUD were in the green briefly in the early hours of the morning after Chinese PMI data printed much better than expected. read more

USD bid during uneventful morning session

Monday has proven to be a reasonably uneventful open to the week after the tumult of the past three weeks. The dollar is trading modestly higher against the G10 currencies today, although there is little sign of the intense investor panic and risk aversion that drove the dollar to highs earlier in the month. read more

Dollar holds steady, EU squabble and BoC surprise

The greenback fell by over a percentage point against all G10 currencies yesterday as liquidity conditions improved in markets and the dollar’s synthetically produced strength due to credit and liquidity issues unwound. read more

Plumber Poloz empties toolkit to fix dysfunctional markets

Blocked system? Call Poloz the plumber Governor Poloz made it clear very quickly that today's rate cut to the effective lower bound of 0.25%, along with the announcement of its first QE program, was to address dysfunctionality in markets in order for monetary policy to effectively provide support to the macroeconomy. This theme was reiterated a countless amount of times throughout the press conference, especially when the Governor was asked about the new QE program. Poloz didn't argue that the bank's new buying scheme of C$5bn a month of sovereign debt along the curve was QE, but was intended to tighten bid/ask spreads in Canada's sovereign bond market and return functionality as opposed to providing economic stimulus directly. Deputy Governor Wilkins highlighted the dysfunctioning markets was in part due to people moving to cash in order to deleverage while liquidity may have also dried up due to market participants working from home. Many, including ourselves, had expected the QE announcement on the April 15th meeting given the increasing credit strains in Canada's credit market. However, in the current market climate, it is likely that such monetary actions are announced outside of meetings should conditions warrant. On the topic of negative rates, Governor Poloz said they remain on the table. Previous comments by the BoC Governor that date back to 2015 suggests the BoC still has another 75bps of conventional easing space until investors turn to cash assets, with a speech dating back to 2015 highlighting that the "theoretical lower bound" is around -0.5%. Lessons drawn from other developed economies suggests that the pace of rate cuts will substantially decrease on the way to negative territory and unconventional tools will become more favourable than cuts to the overnight rate. Today's cut now sees the BoC join the Bank of England and the Fed at their respective effective lower bounds. The BoC is now truly the Fed's laggard as the commercial paper scheme and open-ended QE program is also reminiscent of earlier announcements by the US central bank. The BoC will likely follow the path trailblazed by the Fed and BoE in this vein, with more unconventional monetary tweaks such as commercial mortgage bond purchases, increased monetary financing operations for municipalities or increase the purchase of corporate securities. With respect to currency markets, the BoC fielded no discussion on why the Fed's swap line hadn't been extended via repo operations to the primary market. While this could be attributed to the fact that cross-currency basis swaps no longer exhibit a large premium for USD access, it also suggests that the BoC are content with the level of loonie weakness. We argued earlier in the week when USDCAD was trading back up at 1.45 that this would provide a ceiling for the pair, while a bottom to USDCAD may be formed by verbal intervention from Governing Council members like that seen in H2 2019. To summarise, today's BoC announcement was merely to address a plumbing issue via the means of flushing out the blockage and to quote the Governor himself a more "coherent story" will be available at the Bank's next policy meeting.    Graph: loonie set to break 3-day winning streak after BoC announces surprise rate cut and open-ended QE program   Graph: the overnight lending rate returns to the '09 floor, also known as the effective lower bound   Author: Simon Harvey, FX Market Analyst     This information has been prepared by Monex Canada Inc., an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Inc., or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. read more

Markets breathe a tentative sigh of relief

Price action across FX, equities, and fixed income are suggesting a mood of relief today, with the US dollar lower across the board and equities higher after the US Senate passed a $2 trillion fiscal stimulus bill. read more

USD may find support as Central Banks up liquidity

The US dollar continues to trade on the back foot in today’s session following its fall from grace yesterday. The DXY index, which tracks the dollar’s performance against most major trading partners, continued its fall this week from a 4-year high. read more

Loonie may have bottomed out as BoC keeps support policies in the war chest

USDCAD is back down below the 1.45 level this afternoon and has seemingly found firmer footing that historical support levels going forward. read more

Latest Fed measures seem to be working, for now…

After a worrying initial market reaction yesterday, the Fed's aggressive monetary and credit easing measures appear to be working. The US dollar is generally weaker across the board, US equity futures are pointing up, and there are reasons to believe the pressure on financial conditions may be easing. read more

Fed switches to “Whatever it takes” in bid to beat yield curve and financial conditions into submission

Jerome Powell and the FOMC have finally had their “whatever it takes moment” and promised open ended asset purchases aimed at beating the US yield curve and financial conditions into submission. read more

Markets breathe a sigh of relief, but is it short lived?

Global currencies are getting a breather as the dollar pares gains after a week of rampant strength. All major currencies are in the green against the US dollar overnight, after the wave of risk aversion and dollar liquidity stress that drove the greenback higher has abated slightly. read more

Norges Bank surprises with another rate cut

Norges Bank unanimously decided to cut its benchmark policy rate by 75 bps to 0.25% this morning – a record low for Norway’s economy. The previous cut was announced just a week ago when the central bank reduced its policy rate from 1.5% to 1%. read more

USD Note

The dollar’s rampage continues into another session today in FX markets, focusing on the G10 currencies that previously performed well amidst the market turmoil; EUR, JPY and CHF. read more

Currencies rally vs US dollar amid reprieve in global risk-aversion

Global currencies began to rally overnight as risk appetite improved and bond yields fell in the developed world, although some major currencies have yet to recoup their losses from yesterday. Central banks and governments around the world introduced further monetary and fiscal measures aimed at responding to the virus shock. read more

What to expect from SNB tomorrow

The Swiss franc currently sits at a 5-year high against the euro on the back of increased global demand for heaven assets triggered by fears of recessions occurring globally. read more

Canada unveils $82bn fiscal package

Worryingly for spectators, PM Trudeau sidestepped questions about whether the Canadian economy is set for a recession, which it undoubtedly is in the current climate. read more

Sterling falls to unstoppable US dollar as markets stare down the barrel of crisis…

Sterling has fallen to the lowest level against the US dollar since 1985 amid a global dollar liquidity shortage that has seen the greenback run rampant against all major currencies. read more

The Fed dusts off another 2008 liquidity tool

The Federal Reserve today said it has established a new Commercial Paper Funding Facility, similar to that used during the 2008 financial crisis, to try and appease further dollar funding stresses read more

MXN faces further downward risks under current market uncertainty

The peso has led losses driven by the coronavirus within the EM space, and its dominant trading volume in Latam has made it particularly sensitive to recent market turmoil in the area. read more

Riksbank blow dust off of QE machine to avoid shame of negative rates

Late on in yesterday's session, the Riksbank came out and signalled to markets that it was willing to spend as much as Kr300bn ($30bn), or almost 6% of GDP, from March to December this year on government bonds, municipal bonds and covered bonds. The bank also flagged that it may decide to expand into corporate bonds should it deem necessary. This marks the second batch of stimulus released by the Swedish central bank after Governor Ingves announced $50bn in bank loans back on the 13th March.  By restarting QE, the Riksbank has pledged to almost double its balance sheet. With the number of assets owned by the central bank increasing at a rapid rate, they had to get creative and include new securities in their purchasing programme, hence the inclusion of covered bonds and municipal bonds in their new QE programme. The measures taken didn't just stop there, however. The bank will also offer out Kr500bn to companies via banks to ensure that a credit shortage will not exacerbate the economic impacts of the virus any further. The Riksbank will offer up to Kr500bn against collateral for onward lending at a 0% rate (variable and fixed to the repo rate which is also predicted to stay at 0% for the foreseeable future) for up to 2-years. Further measures announced: Reduce the lending rate on overnight loans to banks from 0.75 to 0.2 percentage points above the repo rate. The repo rate remains at zero. Offer banks to borrow an unlimited amount of money on a weekly basis against collateral at three months' maturity at an interest rate of 0.2 percentage points above the repo rate. Increase flexibility with regard to the collateral banks can use when they borrow from the Riksbank, which will, among other things, give banks more scope to use mortgage bonds as collateral. The countercyclical buffer rate, the amount of capital to be held on the balance sheet of banks, is to drop from 2.5% to 0% in order to pre-emptively avoid a credit crunch. The Riksbank has also announced that they are prepared to take further measures and supply liquidity even between scheduled meetings, while purchases of bonds by non-financial institutions may also be considered.  Given the size and the scope of these measures, it is unlikely the Swedish central bank will dive back into negative rates after they fought long and hard to return the repo rate to 0%. The impact will be supportive of the economy, especially the retail sector given the loan support, and reiterates the global narrative that central banks will continue to deploy all tools at the zero lower bound to provide ample liquidity to support the economy. However, once the dust settles and conditions return to normal, the measures put in place by the Riksbank are likely to keep the currency pinned at weaker levels as the central banks purchasing crowds out potential foreign investment. The krona has sold off over 1.5% against a surging US dollar today, while it is, in fact, flat against the euro on the day. EURSEK chart   USDSEK   Author: Simon Harvey, Market Analyst at Monex Canada and Monex Europe.   DISCLAIMER: This information has been prepared by Monex Canada Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. read more

Fed Throws the Kitchen Sink

The Fed has thrown the kitchen sink of easing measures at the coronavirus crisis. This may take the edge off the dollar strength seen recently but will not cause broad weakness. US yields have fallen and liquidity stress is likely to ease due to the scale of the Fed’s repo and swap arrangements. read more

BoC joins the surprise party and doesn’t come empty handed

The Bank of Canada took the brave decision to add to its prior repo rate announcement by dramatically cutting rates by 50bp in an unscheduled announcement. read more

Fed goes nuclear to suppress dollar demand and mitigate economic impact from virus

The Federal Reserve has taken the extraordinary step of slashing interest rates a full percentage point, restarting quantitative easing, and announcing a host of additional liquidity and credit easing measures. After these measures, the Fed’s monetary ammunition is all but spent; all that is left is expanding QE, negative rates, or the nuclear option of direct currency intervention. Neither of these options are appealing: the best hope for the global economy now are fiscal and public health policy. The prompt timing and sheer scale of the Fed’s measures makes it clear that the central bank, like many others globally, is viewing the virus shock as the most serious threat conceivable to both the real economy and financial system. This is not a trade war or a bad quarter of growth but an unprecedented threat to the global economy and financial system. The last time these measures of this scope were implemented was in 2008 after the financial crisis, but back then they were introduced over the course of months, not all in one night just prior to Asian markets opening. These are the actions of a central bank that believes it must act quickly and decisively facing a crisis of historic proportions. The reason the dollar has not shrugged in response to this historic easing measures from the Fed is simple: global financial markets are firmly in a crisis dynamic, and monetary measures from the Fed can at best only slightly dent demand for the greenback. After today’s measures from the Fed, global central banks are at the absolute limit of their ability to mitigate the impact of the virus on the real economy. The ECB, for instance, all but conceded defeat and begged for fiscal assistance at last week’s press conference. Some smaller central banks will be able to begin asset purchases as the shock worsens, and the Fed could expand QE or commence open ended purchases. But these measures may pale in comparison to the sheer unprecedented scale and duration of the virus threat.   EURUSD chart Source: Bloomberg Finance L.P. GBPUSD Chart Source: Bloomberg Finance L.P.   Author: Ranko Berich, Head of Market Analysis at Monex Canada and Monex Europe.   DISCLAIMER: This information has been prepared by Monex Canada Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. read more

Coronavirus fears forces a race to the bottom

Monetary policy has been the global economy’s front-line of defence against the spread of COVID-19, with fiscal support only now beginning to trickle through outside of Asia. read more

UK budget set to blow the doors off

Receptive market conditions, changing political ideologies, and the coronavirus shock all mean that this week’s UK budget is likely to see Rishi Sunak open the fiscal taps and allow the UK deficit to increase.  read more

ECB must ease – but has limited options

Prior to the recent severe worsening in the coronavirus risk due to outbreaks in Europe and elsewhere globally, the eurozone economy was already in a delicate spot and the German economy was teetering on the brink of recession. read more

Policy responses to the coronavirus in majorly impacted economies

Monetary support has been in play in Asia since February 3rd when the PBoC cut repo rates and injected liquidity to soothe volatility, as onshore markets re-opened after the lunar New Year amid containment measures. read more

Surprise 50bp cut from Fed puts pressure on BoC

CAD The loonie briefly strengthened after yesterday’s surprise rate cut from the US Fed, but soon afterwards found itself once again on the back foot and closed lower against the greenback. The Bank of Canada has a high stakes rate decision today, which will be announced at 15:00 GMT. Canada’s official interest rates are now comfortably the highest in the G10 economies and well above the effective US rate, while the global coronavirus outbreak continues to threaten worsening risks to both global and Canadian growth. In this context, a rate cut from the BOC seems highly likely today, with the main source of uncertainty being the size of the move. The decision will not be straightforward: a 25 basis point cut may prompt a loonie rally due to markets expecting a larger move, while a 50 basis point cut could carry the risk of stoking a housing market bubble. USD The dollar was rocked by the seismic news of an intra-meeting rate cut of 50 basis points from the Federal Reserve yesterday, and quickly undid recent progress against currencies like AUD, SEK and NZD, as well as many previously troubled emerging market currencies. The Fed’s surprise rate cut was the first outside of a regular monetary policy meeting since 2008, and was accompanied by a press conference where Fed chair Jerome Powell said the US economy remained strong, but that the early indicators of the virus’s impact had worsened the outlook and prompted a rate cut. On the surface, the rate move did look like markets have bludgeoned the Fed into cutting rates. OIS markets were pricing in 50 basis points of cuts as early as the end of last week, and interbank lending rates have been plummeting at rates not seen since 2008 over the last week. Leaving rates unchanged, or not delivering on expectations of a cut, would have further tightened financial conditions. The cut shows the extent to which the coronavirus outbreak has proven to be far worse than the previous base case assumption shared by central banks, which anticipated the outbreak would be contained and a relatively rapid recovery would occur in Q2. US equities closed lower yesterday despite the rate cut, indicating that the era where marginal changes in monetary policy could instantly send equity prices to fresh all-time highs and allay fears of a growth slowdown may finally be coming to an end. Elsewhere, the race to become the Democratic party nominee for the US Presidency became a two-horse race, after Joe Biden gave a strong showing at yesterday’s 14 state nomination votes. Biden won 9 races, while his Rival Bernie Sanders won four including California. Today at 13:15 GMT ADP will release its estimate of non-farm payrolls, followed by services purchasing managers indices from Markit and ISM at 14:45 and 15:00 respectively. EUR The euro found support in the Federal Reserve’s surprise decision to cut rates with 50 basis points in an intra-meeting policy change, and jumped to levels not seen since the beginning of the year. This morning, EURUSD has retreated from yesterday’s highs following the early results of the Super Tuesday primaries. Considering that the eurozone may be more susceptible to the economic impacts of the coronavirus than the US, the European Central Bank may soon follow in the Fed’s footsteps. However, the ECB has limited scope for rate cuts considering its current negative interest rate levels and called for the need for fiscal policy repeatedly. ECB’s Francois Villeroy de Galhau mentioned in an interview with the Dutch newspaper De Telegraaf that “our current monetary policy is already very expansive and acts as an economic stabilizer”, and that “governments with fiscal space should use it”. Governing Council member Robert Holzmann mentioned that targeted longer-term refinancing operations will be under consideration in the policy meeting, but he does not see an urgency for the measure. This morning’s German retail sales release showed a sharp expansion of 0.9% MoM in January, matching consensus. Though the increase was expected, the retail sales come as a good start to the year amid the coronavirus spread, suggesting that the virus’ direct impact on the German economy appears to be relatively low judging by the current headlines. Markets turn their focus to the final Eurozone PMI prints which will be released between 08:15 and 09:00 GMT. GBP Amid yesterday’s momentous events in the US and the resulting market turmoil, sterling found itself relatively out of the limelight and continued to hover near yesterday’s lows against the euro, while rallying slightly against the US dollar. Outgoing Bank of England governor Mark Carney told lawmakers of Parliament’s Treasury committee that the BoE would be prepared to cut interest rates if necessary to mitigate the impact of the coronavirus outbreak. Carney emphasized that the virus was likely to be a temporary shock, and that the Bank’s role was to prevent “viable” businesses closing due to temporary virus containment measures. In a nod to possible rate cuts, Carney said that it was “plausible” that the negative demand shock would be greater than the inflationary supply shock of the virus. Yesterday’s data included a decent print for the construction purchasing managers’ index, which tose to 52.6 in February. This morning will see the release of the services PMI at 09:30 GMT.     DISCLAIMER: This information has been prepared by Monex Canada Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. read more

Murmurings of fiscal action in Germany

With the euro attempting a nascent recovery last week in the face of a worsening virus shock, and the ECB seemingly resistant to short term policy easing, hopes of a fiscal response from the eurozone’s largest economy came in to focus last week. read more

RBA must weigh coronavirus shock against tailwind from rising house prices

With AUDUSD reaching fresh decade lows last week and house prices rising, the RBA has considerable tail winds to weigh against the incoming coronavirus shock at Tuesday’s meeting. read more

Bank of Canada preview – wiggle room may dissipate by April’s meeting

Next week’s Bank of Canada meeting is arguably too soon to see a rate cut from Governor Poloz, but swap markets have aggressively priced in a greater than 50% probability on Friday afternoon alone. read more

Cracks finally show in US dollar as markets expect FOMC cuts driven by virus shock

As the virus outbreak spread to new countries and hopes of containment faded last week, the US dollar finally began to weaken against certain currencies. read more

China PMIs: Time to address the elephant in the room

While a slowing global economy due to the impacts of the coronavirus and its containment is a well known narrative, markets have still grappled with how to price it. read more

Sterling sells off on latest brinkmanship from Boris

As outlined in earlier speeches, the mandate is a bid for absolute control over UK standards for competition, environmental standards, labour rights, and the other areas that the EU has insisted must be subject to “level playing field” provisions read more

Loonie finally joins peers as G10 rallies

After spending much of Friday's session smack bang in the middle of the G10 currency board, the loonie followed its peers in rallying against the US dollar. read more

Mboweni’s medium-term budget in scope for South African investors

Following an underwhelming State of the Nation Address by South African President Cyril Ramaphosa two weeks ago, market participants turn their eye to Finance Minister Tito Mboweni’s medium-term budget announcement on Wednesday 26th. read more

Euro weighed down by economic sentiment and a strong US dollar

Last week, the currency fell through a 34-month support level against the dollar, after plummeting nearly 3% since the beginning of February and recording fresh lows for 13 consecutive sessions. read more

USD dominant as markets focus on worsening regional macro risk

With US data continuing to surprise to the upside, the dollar was once again left as the best option for investors seeking safety and saw a broad wave of strength. read more

UK consumer spending uptick comes after noisy adjustments

January’s retail sales report suggests that UK consumers are joining in the burst of optimism experienced by businesses in the new year. read more

Canada’s inflationary overshoot may not last

Today’s CPI release saw headline inflation overshoot expectations by 0.1 percentage points to post a print of 2.4% in January – the highest reading in 15 months. However, the loonie’s reaction was relatively muted. Expectations of a Bank of Canada rate cut were trimmed at the margin in the short-run but the currency failed to take positive surprise as a source of stimulus. The reason? The underlying data is less positive than the headline reading. Higher gasoline prices, around 11.2% YoY, juiced the headline reading but the average core measure actually fell by 0.04pp to 2.03% YoY. This is best highlighted by the CPI common reading which fell to 1.8% YoY in January from 2.0%. While the slump itself isn’t anything overly concerning due to the common measure sitting at 1.8% or higher since January 2018, it highlights that once the idiosyncratic oil price effect is stripped out that underlying inflation may actually be weaker than expected. This is likely to weigh on BoC policymakers minds, especially when looking forward towards Q2, as economic activity is yet to show a substantial rebound from Q4’s stagnation and real wage growth continues to be siphoned into deleveraging as savings intentions rise. The concerns only increase when you project the likely oil effects towards February’s reading. Oil markets are some 17% off from January’s high while the average price of a barrel of WTI jumped by around $5 in February 2019. The two effects are likely to cause oil prices to flip from a source of stimulus to a headwind for inflation data going forward. Despite the aforementioned downside risks to the BoC outlook, we still believe the expectations of a rate cut by the central bank in H1 are stretched. Markets are currently pricing a 50% probability of a 25bps rate cut in the June meeting. Without clarity on the economic impact, the coronavirus had on China’s economy, and thus the true spill over to global growth conditions, we maintain our stance that the Governing Council will remain on hold during Poloz’s term.   Chart 1: CPI excluding gasoline falls to 1.9% YoY   Chart 2: Gas and fuel prices drive headline inflation in January   Chart 3: Rate cut bets are trimmed after CPI release but USDCAD is less sensitive   This view is highly likely to change once China’s economic data is released and the fiscal response is announced, but for now, we believe the housing market sets a higher bar for a rate cut than markets currently imply for the coming meetings.   Author: Simon Harvey, FX Market Analyst at Monex Canada.      DISCLAIMER: This information has been prepared by Monex Canada Inc., an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Inc., or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. read more

Markets vs. the Fed: An ongoing debate

The Federal Reserve fund futures prices show that markets are expecting more easing from the Fed this year, probably as a result of the macroeconomic impact of the coronavirus outbreak. read more

Coronavirus risk and souring data weigh on the euro

Last week, the single currency breached its 33-month low against the US dollar due to weak economic data and coronavirus fears. read more

UK PMIs follow Javid resignation

Sajid Javid’s resignation as Chancellor of the Exchequer last week triggered a rally in sterling, as markets began to speculate that his departure suggested an increased likelihood of fiscal stimulus from Boris Johnson’s government. read more

Firm housing data supports loonie

USDCAD is broadly unchanged compared to the beginning of yesterday’s session, after the loonie rallied overnight. No data will be released today, but with global investor risk appetite still on shaky ground, this may prove no barrier to moves in the loonie. read more

Risks to the downside as RNBZ must navigate China slowdown

The RBNZ surprised both our expectations and the market by holding rates unchanged in November, but must now navigate the risks of coronavirus to New Zealand’s small open economy, whose largest trade partner is China. read more

The Riksbank’s return to zero – was it wise?

Next week marks the first Riksbank meeting since December’s decision to hike the repo rate by 25 basis points and return policy to 0%. While the central bank signalled heavily that the return to zero would occur in either of the December or February meetings, the decision to hike rates sooner rather than later wasn’t unanimous. read more

PBOC toolkit prevents panic

Chinese authorities rolled out a now-familiar crisis response strategy to prevent panic in financial markets last week. Repo rates were cut by 10 basis points on Monday, and a net 550 billion yuan was pumped into repo markets over the first two days of the week. read more

OPEC undecided heading into the weekend

Last week’s emergency three-day OPEC meeting in Vienna in response to news that China’s oil demand has fallen by 20% due to the coronavirus lockdown has yet to bear fruit. read more

Loonie back above 1.33 with no rest in sight

The loonie continues to sell-off this morning as the US dollar continues to firm while oil markets provide little support. Following a three-day OPEC+ meeting in Vienna, markets still await confirmation from Russia regarding an extension to the current production cuts until the year-end while a deeper production cut in the short-term is still weighed. read more

Loonie floating as OPEC meeting extends to third day

Despite relatively hawkish commentary from the Bank of Canada’s Deputy Governor, Carolyn Wilkins, yesterday and a rebound in crude prices, the loonie still slumped over the course of the session. read more

Loonie focuses on OPEC discussions amidst pushback from Russia

Risk appetite may have improved since yesterday’s PBOC intervention stabilised Chinese equity markets, but the loonie has not yet managed to mount a convincing rally, instead rising slightly over the course of yesterday before falling back overnight. read more

Loonie takes a hit as crude oil prices sink further

The loonie took a beating yesterday, after crude oil prices fell amid reports that Chinese demand for crude may fall by as much as 20% due to Coronavirus. After an improvement in risk appetite overnight, the loonie has rallied slightly along with crude prices. read more

Banxico easing likely to continue

The Mexican peso outperformed in the first month of 2020, being one of the only four currencies in the EM space with positive spot returns against the dollar. read more

Sterling after Brexit

With the UK having formally departed the European Union on Friday, Brexit has finally been accomplished. Historical momentousness aside, the UK’s formal departure from the EU brings little clarity for sterling. read more

FX pricing of coronavirus has been limited but all may change

The coronavirus has rocked global financial markets this week although the effect has been limited in the G10 FX space compared to equity and commodity pricing. read more

CNY weakens but no signs of collapse

The loonie remained on the back foot last week, and shows no signs of rallying this morning, as global risk appetite remains poor due to Coronavirus concerns, and crude oil prices remain on the defensive. read more

Loonie suffers further losses as USD roars

The loonie continues to find itself under pressure from broad US dollar strength despite oil prices rebounding in this morning’s session. read more

Volatility returns to USDCAD

The Canadian dollar was one of the more exciting G10 currencies against the dollar last week with only the Norwegian krone and British pound proving more volatile. read more

FOMC in focus: on hold until proven otherwise

This week’s FOMC meeting not only marks the first of eight meetings in 2020 but also the first time Jerome Powell faces both media and markets since the phase one trade deal was signed. read more

Monetary Policy Committee likely to hold rates in knife-edge decision

Thursday’s MPC decision will be the least clear cut in years, with UK data uncertainty and global conditions providing compelling arguments for both an “insurance” rate cut and for no change. Hard UK macro data such as retail sales and GDP have made it clear that the economy had a dismal fourth quarter, in large part due to political uncertainty from the general election and the risk of a no-deal Brexit. In response to the run of poor data and shaky global conditions, several MPC members have made arguments for a pre-emptive rate cut over the past few weeks, most notably Michael Saunders and Gertjan Vlieghe. As last week’s “Week Ahead” noted, markets duly began to price in a rate cut from the Bank of England, with GBP trading to lows for the year around the 14th of Jan.   Chart: OIS-Implied Probability of a rate cut shows this week’s MPC is a coin toss. Since then, several data points have presented a serious challenge to the argument that easing is necessary now… The Q4 slowdown was likely triggered by extreme political uncertainty due to no-deal Brexit risk prior to the mid-October withdrawal agreement deal, and the general election in December. Now that these uncertainties have reduced substantially, the outlook for Q1 has improved. Early Q1 survey data released this week supports this idea: the flash Markit HIS purchasing managers’ indices for January showed the fastest increase in new work since 2018. The composite PMI, which is designed to be a good proxy for overall GDP growth, rose from 49.3 to 52.4, the fifth largest monthly jump in the history of the survey. This is consistent with a quarterly growth rate of 0.2%. The MPC must balance the significant slowdown in growth seen in Q4 against the probable recovery that currently appears to be happening. Recent official communication outlines the way that this decision is likely to be approached. The minutes from December’s meeting, when rates were kept unchanged, made it clear that January survey data would be relevant to near term policy making. Special emphasis was made on the Bank’s Agency network and Decision Maker Panel. The minutes included a warning that policy would need to be eased if “global growth failed to stabilise or if Brexit uncertainties remained entrenched”. Looking at January’s PMIs and the signing of the US-China phase one trade deal, both of these factors have improved, not worsened. November’s Monetary Policy Report projected a solid growth pickup in the second half of 2020, suggesting that Q4’s slowdown would be far less important for the MPC than the outlook for future growth. On this basis, we believe the MPC will keep rates on hold this week, although this is the most finely balanced decision in years. Based off the improvement in business sentiment seen since the general election, sustained tightness in the labour market, and an easing in global concerns, the conditions set out by the November minutes for avoiding a rate cut appear to have been met. Although it is not our base case expectation, a rate cut remains entirely possible, should Saunder’s arguments about risk based considerations take hold. If the MPC does choose to follow Saunders’ reasoning in cutting rates due “risk management considerations”, it would be in line with a global trend of central banks increasingly emphasizing the asymmetry of risks facing policy makers in current conditions.   Chart 2: GBPUSD trading history Given the 50-50 pricing in fixed income markets, GBP is likely to move significantly in response to the MPC decision on Thursday. Put simply, with rates close to the zero lower bound, and upside inflation risk nowhere to be seen, there is a strong case for policymakers to err on the dovish side, to avoid the serious risk of being stuck in a zero rate vortex of the sort that has engulfed the ECB and BOJ. Thursday’s vote will shed significant light on how popular this argument is among the MPC, regardless of the decision itself.     Author: Ranko Berich, Head of Market Analysis at Monex Canada.     This information has been prepared by Monex Canada Inc., an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Inc., or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. read more

Loonie lower post BoC but a rate cut isn’t a given

Markets have previously been wrong-footed when trying to predict the Bank of Canada, and it looks like they may be again if verbal communication does become Poloz’s main tool to stimulate growth. read more

Loonie slides as OPEC meeting back on

The RIA news agency cited comments from OPEC’s Secretary-General Barkindo yesterday who said the March meeting will go ahead. This goes against the markets preconception that the status quo in output cuts will be maintained until a meeting is held in H2 2020. read more

A week of bad data and dovish MPC commentary builds expectations of rate cut

Last week’s UK data and MPC commentary overwhelmingly pointed towards a rate cut from the Bank of England. read more

USDCAD outlook remains intact as trade deal remains on pause

While the pair broke the psychological barrier in the early part of January due to rising geopolitical tensions in the Middle East and its ensuing impact on oil markets, USDCAD has since resumed trading above $1.30 leaving the base case intact. read more

EURUSD rally goes beyond general broad dollar weakness

Having surged 5% since the November's lows, we anticipate the EURUSD rally to extend into 2021, with a large proportion of the move to occur in the first half of the year on vaccine optimism and plans to re-open economies. read more

Loonie receives boost after WTI surges

Oil jumped 3% during early trading today as US Iran tensions continue to build. The crude rally adds tailwinds to the loonie’s recent surge, with the Canadian dollar on the offensive this morning. read more

Loonie benefits from soggy US dollar

The loonie also benefited from Friday’s dollar weakness, reaching its strongest levels since October. Trends in the broad US dollar, mean the week ahead may prove to be eventful for the loonie nonetheless. read more

USD soggy over the festive period

Over the course of the week, USDCAD is 0.4% lower with the loonie’s strength pushing Monday’s poor GDP reading to one side. The relative risk-on mood continues to benefit the Canadian dollar and crude prices, but market volatility is suppressed. read more

Loonie sells after Deputy Wilkins strikes dovish tones

The loonie fell a third of a percentage point in yesterday’s US session as Bank of Canada’s Deputy Governor, Carolyn Wilkins, reiterated the central bank’s dovish tones in a speech focused on complacency in monetary policy in a time of growing global uncertainty. read more

Dollar trades sideways

The US dollar traded with a mixed tone last week, with idiosyncratic reasons and changes in broad  risk appetite driving losses for AUD, KRW and MXN and gains for NZD, ZAR and GBP. read more

USDCAD may test $1.33 if core CPI undershoots

While markets remained in the dark about the possibility of a phase one trade deal being struck between the US and China, and the greenback traded mixed in such an environment, the loonie didn’t fare well in either scenario. read more

Loonie marginally weaker as oil slumps on Saudi headlines

The same cannot be said for today as WTI reversed all of yesterday’s gains following signals that Saudi Arabia will increase production by 150,000 barrels per day to meet pre-existing contracts with Chinese investors. read more

Loonie sells-off post BoC despite mixed messages from Poloz

The Canadian dollar is the worst performing G10 currency today, falling the most in a month, after a dovish rate statement from the Bank of Canada sent USDCAD through the $1.3150 handle. read more

The Bank of Canada have no reason to cut rates soon, unless the Fed forces them to

Monetary policy has been getting progressively looser around the globe with very few central banks bucking the trend – one of which being the Bank of Canada. read more

Loonie touches 3-month high on falling inventories

The surge in oil prices helped the loonie touch a 3-month high but has begun to pare its gains in this morning’s session. read more

Cracks in US-China “phase one” deal prompt mild risk-off mood

Negative surprises in Chinese trade data along with a mild reversal in US-China trade sentiment sent crude oil lower yesterday. The haven flow also boosted the greenback. Both moves joined forces to send the loonie marginally lower against the greenback, paring some of Friday’s post-labor market report gains. read more

Loonie tears higher post labour market data

We have long awaited a bout of loonie strength, but it finally came after the release of September’s labour market data. The US dollar took on some water Friday as US-China trade negotiations bore fruit. read more

Under pressure ft Jerome Powell and the greenback

Soft survey data dominated FX market pricing last week following a substantial downturn in the US ISM manufacturing index on Tuesday. read more

Canada’s economy stalls in July

After trading in a remarkably tight range last week, USDCAD extends to the upside as data shows Canada’s economy didn’t expand in July. read more

Loonie looks past CPI to eye up Fed tonight

Today’s inflation data was overlooked by the loonie this morning. The average of the core-CPI measures the Bank of Canada uses continued their recent trend read more

Oil markets continue to drive USDCAD

The loonie joined the Norwegian krone and Japanese yen as the sole currencies to make gains against the US dollar yesterday. The risk-off sentiment and spike in oil prices marginally filtered into currency markets, helping the petro-linked currencies predominantly. read more

Oil rallies most since 1988 – markets await US supply response

The continual slide in crude last week weighed on the loonie, which ended up reaching levels not seen since the Bank of Canada rate statement. However, developments in the middle east over the weekend has helped the loonie claw back some losses this morning as the oil sensitive currency sits a third of a percentage point higher at open. read more

Oil markets lubricate loonie’s slide lower

The loonie has defied the broad G10 move this week, reversing early gains to drop close to last Friday’s open, despite the broad US dollar weakness. read more

Loosening of Iranian sanctions puts pressure on loonie and crude

The loonie reversed the last two trading day’s gains yesterday as Donald Trump weighed up easing sanctions on Iran. The double whammy of Bolton and now Iran puts pressure on oil markets as industrial sectors slow globally and demand pressures thin. read more

Bolton dismissal pares loonie’s gains

An increase in housing starts and building permits over the last few months sent USDCAD to session lows yesterday before news struck that Donald Trump fired National Security Advisor John Bolton. read more

Loonie awaits fresh catalyst to break higher

The loonie grabbed onto the climb higher in oil prices yesterday to sustain its recent rally. USDCAD ultimately hit a fresh low, trading at levels not seen since the end of July, but failed to hold its gains upon closing. read more

Loonie maintains rally as oil prices firm

The loonie flew to a 5-week high against the US dollar last week. The rally was fuelled by a neutral Bank of Canada statement, a broadly soggy US dollar, and strong labor market data to wrap up the week. Today, oil markets are seeing green. read more

What tonight’s vote – and a general election – means for sterling

Elevated no deal risk is the overall driver of the current bout of sterling weakness, no-deal risk remains the be all and end all for sterling read more

Strong week of data scrapes sterling off 2 year lows as G7 summit looms

Sterling rose to just shy of a high for the month last week after a series of strong data releases seemed to take the edge off Brexit concerns read more

Italy prepares for a vote of no confidence

Tensions have been simmering between the two parties, Salvini’s calls for a vote of no confidence will play out this week read more

PBOC puts Yuan into play for play for trade war

The yuan is in play as a factor that Chinese authorities are willing to use in the event of further escalations in the US-China trade war read more

Mexico’s Central Bank faces a complex trade-off ahead of Thursday’s monetary policy decision

The Mexican peso is exposed to downside pressures given the uncertain scenario, a restrictive stance of the monetary policy read more

USD rally continues as White House and Democrats reach budget deal

The dollar is well bid this morning and continues to make gains verses both developed and emerging market currencies, loonie began to retreat read more

Bank of Canada won’t cut rates in 2019 as domestic data firms

A rebound in economic activity, an uplift in inflationary pressures and a firming crude oil market would normally provide the perfect concoction for a hawkish Bank of Canada (BOC), but not this time. The reason: an uncertain global economic outlook. read more

Traders drop US dollar like a hot potato

Traders have dropped the dollar like a hot potato over the course of the last five working days, with the dollar DXY index falling 1.75% against G10 counterparts. A dovish Fed isn’t the only reason to sell the dollar as US fixed income yields reduce read more

China accuses US of making wrong call on Huawei

This morning it became clear President Trump has signed a waiver to postpone the sanctions against Chinese technology company Huawei for three months. The market reaction of this potential first step towards atonement is muted, however, as the measures are still to be implemented later. read more

Loonie floats on oil price surge

he loonie was the strongest performing G10 currency on Friday on the back of WTI crude oil prices that reached their highest level of the month, edging closer to 6-month highs. Saudi Arabia can lay claim on the responsibility of a great part of the oil move. read more

Resource sensitive currencies rise on risk-on move

Crude oil undid some of Monday’s losses after Saudi Arabia reported attacks on oil infrastructure. Today at 13:30 Consumer Price Index data will be released. read more

South African election preview

South African elections are set to take place on Wednesday 8th May, with the results expected within 48 hours of polls closing. That being said, most polling stations report results within 24 hours so the market reaction will likely occur on Friday. read more

G10 and EM sell-off post FOMC

Sterling stopped just short of 5 consecutive days trading in the green yesterday as the dollar reigned supreme and took the pound as one of many victims. Even an optimistic Bank of England failed to stem the pound's losses with Governor Carney painting an positive picture of growth and promised future rate hikes - once Brexit is wrapped up of course. read more

Resistance to crude upside looks firm despite supply shocks

Green sprouts appearing through dark soil has become the narrative in FX markets this quarter as global headwinds begin to ease. However, after the strong correction in Q1, the same cannot be said for oil markets as the rally begins to peter out. read more

Lingering spirit Janet Yellen reveals Fed optimism

USD The lingering spirit of former Federal Reserve President Janet Yellen may have stirred current Fed chair Jerome Powell to use the words “transitory factors” when explaining the unexpected fall in core inflation since December. As this shows the confidence of the Fed that inflation will rebound coming months, which justifies a tighter monetary policy, […] read more

Dollar rally in focus ahead of busy data week

The dollar took a breather on Friday, having reached fresh 2019 highs against most major currencies and on indices such as DXY. Friday’s first-quarter GDP data came in well above expectations. read more

USD still on top heading into crucial Q1 GDP print

The dollar remained dominant yesterday, reaching a fresh 23 month high as measured by the DXY index. Yesterday’s data was firm, with Durable Goods rising a solid 0.4% and Unemployment Claims rising slightly to 230,000 for the week read more

If cash is king, the dollar reigns supreme

The US dollar surged yet again yesterday after dovish central bank meetings in Australia and Canada reignited growth concerns and sparked a risk-off move in currency markets. read more

Ifo business survey: Schade Deutschland!

The German Ifo business climate brought sobering news, as it signals that a German economic rebound in the rest of the year remains far from certain, while downside risks prove frustratingly persistent. read more

USD rises to 17-month high ahead of Golden Week holidays

USD Together with JPY, USD topped the G10 currency board yesterday, which send the DXY dollar index to the highest point since June 2017. The move appeared to be led by flows into US equity and treasury markets, which also sent the S&P500 to new all-time highs while solid demand for a 2-year treasury auction […] read more

European markets walk back in to higher oil prices

European markets reopen today with financial markets being rebooting by fresh liquidity. Yesterday saw the US dollar trade mixed against the G10 currencies, making the most ground against AUD and losing out to the Canadian dollar, with oil prices taking the market headlines. read more

US barters for Chinese goodwill

The US and China trade negotiations continue to proceed with some goodwill towards the Trump administration showing from the Chinese camp. The US may be unwilling to lift tariffs on $50 billion worth of Chinese goods read more

Trade tensions and global growth back in focus this week

The UK economy has fared well thus far despite Brexit uncertainty tarnishing business investment, rendering economic data redundant in moving sterling. read more

Dense data could breathe life into G10 FX this week

This week the data calendar is focused around Wednesday’s release of February’s GDP and production data. The UK economy is widely expected to halt its month-on-month growth in February as suggested by the latest batch of PMIs due to Brexit uncertainty taking its toll. read more

ECB Eurozone outlook not so bubbly

The European Central Bank Meeting Accounts that came out yesterday were dovish as can be, yet, as expectations for the Eurozone economy are currently near all-time lows, it didn’t move the needle much on euro crosses. read more

Another A50 extension likely

Sterling briefly jumped on the news, but with the economy showing signs of faltering due to Brexit uncertainty, little relief came for the pound. read more

Double-edged sword for Labour

Corbyn must proceed with caution as the consequences of his next action could be dramatic. Many political pundits have raised concerns over last night’s move by Theresa May as a precursor to a general election. read more

Chinese manufacturing data fuels risk rally

A strong positive surprise in China’s April manufacturing PMI yesterday morning set the tone for the session as investors appetite for risk rose once again. The rebound in the soft data saw China’s manufacturing sector expand for the first time this year, soothing fears over the global growth slowdown. read more

1011 days of Brexit – April fools!

April fool’s day makes it difficult to filter reality and fiction in the media, especially when it comes to Brexit. But here’s what we know so far: April 12 is the new deadline, Parliament will have another series of indicative votes tonight and May will likely have another stab at getting her deal through this week. read more

Brexit day proves pivotal despite extension to April

What should have been Brexit day has now become a power play for May as she tries one last time to whip up some more Parliamentary fudge to help kick the can down the road. An EU deadline to pass a deal and trigger a further six-week extension to May 22 expires tonight. read more

Come on Arlene, poor old Mrs May

Boris Johnson, Iain Duncan-Smith and Jacob Rees-Mogg all aired their support for the deal after May offered to step down should the UK leave with a deal in place at the next deadline. May’s job looks done as the beast that is Brexit takes another Prime Minister prematurely. read more

Another long night in Westminster

At around 19:00 GMT today, MPs will begin to vote on a series of indicative votes to break the Brexit impasse after lawmakers take control of the Commons business paper, with the results expected at around 21:00 GMT. read more

33 MPs cause another historic government defeat

33. That’s the number of Tory rebels that voted for the historic Letwin amendment, with 3 ministers having to resign due to defying the party whip. read more

Egregious Eurozone sentiments spook world markets

The euro took the disastrous Purchasing Manufacturing data on the chin on Friday and fell as much as a full percent against the greenback, and even more against JPY and GBP. read more

Mo Brexit, Mo Problems

Fortnight. No, not the hit game millennials flocked to play. It is how long the EU leaders gave May to avoid a hard Brexit next Friday. It was decided last night after a horrendously long meeting that the EU would extend the Brexit deadline until April 12. read more

Quelle Surprise by Powell and Co

Another dovish turn by the Federal Reserve last night sent the dollar plummeting across the board with the broad DXY index falling 0.66%. The revised forward guidance measure showed 11 out of 17 Fed officials are not planning on raising rates at all in 2019, down from the market's assumption of one 25 basis point hike this year. read more

Euro prospects capped by softer wage growth

EUR held the lines yesterday despite a softer Q4 wage growth figure, that may limit the prospects of strengthening consumer spending and rising core inflation. read more

EM Currencies Rally in Muted G10 Market

Emerging Markets rallied against the US dollar as a whole yesterday as markets anticipate further dovish tones from the Federal Reserve on Wednesday. read more

Brexit may be wrapped up this week, but it looks unlikely

Sterling gears up for yet another pivotal Brexit week. The next 5 days determine whether we leave the EU with a deal in place in the next month or whether a longer delay to Article 50 will be imposed. read more

Third Time Lucky For May

If a deal is pushed through next week in a third meaningful vote, May will request a short extension to A50 such that the legal framework of her deal can be finalised. read more

Fresh highs for Sterling as no-deal “ruled out”

The path of least resistance for sterling today continues to be higher as the chances of May’s deal passing or an extension increases, although caution is warranted, as there may be further twists in the tale. read more

Back to square one for May

Back to square one for both the pound and Brexit negotiations. Parliament today sees a vote on whether the UK exits the EU with no-deal in place or not on March 29th at 19:00 GMT. read more

Deadline Day for May

The pound is likely to be highly volatile today as the Brexit headlines come thick and fast prior to tonight’s vote at around 19:30 GMT. read more

Finally, some progress on Brexit?

The market remains adamant that this week’s indicative votes will lead to a minor extension of roughly 2 months in Article 50. read more

When doves cry – a Mario Draghi story

The euro has managed to drag itself slightly higher from yesterday’s lows, but equity markets were not significantly buoyed by the TLTRO news, possibly due to the limited macro impact of the measures compared to the ECB’s asset purchase program. read more

Dovish BoC paves way for today’s ECB

Sterling continues to gear up for a volatile session next week without any significant data releases this week. Market participants’ attention is firmly on the three major events, the first of which, the meaningful vote, took another blow overnight as scepticism on forthcoming concessions from the EU hit the daily newspapers. read more

Eurozone domestic demand may provide an olive branch for ECB doves tomorrow

The single currency couldn’t match the level of play from the Ajax vs Real Madrid game and ended up in the bottom half of the G10 currency pack, despite hopeful signs from the domestic demand side of the Eurozone economy. Both January Retail Sales and the February Final Services Purchasing Manager Index outstripped the forecasts, lending some tentative support to the thesis that consumers and domestic demand may take the ailing Eurozone economy by the hand. read more

CNY Shrugs off Growth Downgrade

GBP Sterling pared back some of its recent gains yesterday, especially against the US dollar. Brexit will once again be back in focus today as Attorney General Geoffrey Cox will head to Brussels with Brexit Secretary du jour Stephen Barclay in a last ditch attempt to gain further concessions on the Irish backstop. Members of […] read more

May returns to magic money tree to buy a Brexit deal

Sterling starts the week on the front foot after Theresa May nips to the money tree that bought her a coalition government in an attempt to buy a Brexit deal. The £1.6bn “stronger towns” fund looks designed to swing Labour MP’s from Brexit support towns to vote for the current deal in next week’s second meaningful vote. read more

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Simon Harvey

Simon Harvey

Senior FX Market Analyst

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Ima Sammani

Ima Sammani

FX Market Analyst

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