FX Daily Update
The National Bank of Canada | Mar 11, 2016 11:51AM ET
Expectations were high for the European Central Bank’s announcement: rate cuts and increased quantitative easing (QE),
and the ECB delivered as expected.
The initial result were unmistakably logical: the EUR dropped by 150 points against the USD. A few minutes later, ECB
President Mario Draghi clarified that there would not be a rate cut, and the EUR promptly gained back nearly 400 points.
Such reversals are unusual. Everyone (the media, economists, analysts, etc.) came up with varied explanations:
• Communication error made by Mario Draghi who was actually looking to lower the EUR to stimulate the economy
• Markets’ lack of confidence in the effectiveness of monetary policies (case in point: Japan announcing negative rates but
whose currency will no longer drop)
• Technical adjustment that will be corrected over the next sessions
Regardless of the reason, it serves as a reminder that currency markets have been extremely volatile since the beginning of
the year and that you must stick to your hedging strategy without getting distracted.
The USD/CAD pair gained 100 points boosted by Transcanada’s possible acquisition of Columbia Pipeline and oil prices
steady at $38.
We are expecting Canadian employment figures at 8:30 this morning. One last dose of volatility before the weekend!
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