Loonie Tumbles On Falling Oil
ActionForex | Jan 13, 2015 01:58AM ET
Canadian dollar drops sharply overnight as dragged down by the extended decline in crude oil, which reached as low as 45.29 so far. USD/CAD reached 5.5 year high 1.1977 so far in Asian session today. Other than the tumbling oil price, the Loonie was sold off as late reaction to the poor employment data last Friday. Also, together with a low inflation environment, BoC is expected to keep rates at the current level of 1.00% longer than previously expected. Outlook in AUD/CAD changed on the recovery and Aussie and weakness in CAD. Current development suggests that the medium term fall from 1.0349 has completed at 0.9395 already. Near term outlook is turned bullish for 0.9986 resistance and above. But overall, the cross stays in consolidation pattern from 1.0784 started back in 2012. And we'd expect strong resistance as it approaches 1.0349 resistance.
In US, Atlanta Fed president Dennis Lockhart said that the US economy "is hitting on all cylinders" and he'd expect reasonably strong growth through 2015. And he expected Fed to raise interest rates by the middle of the year, "either be informed by some positive indicators or the absence of negative indicators." San Francisco Fed president John Williams said that he "would expect by June that the argument pro and con for lifting off rates will be probably a close call". And, it's a reasonable guess for June hike.
In Eurozone, ECB governing council member Ewald Nowotny said that "we certainly have prospects for very low inflation rates in the medium term." And, “it is important that one takes deflation risks seriously and addresses them." And, also, he warned that "monetary policy has an impact only after a long delay," thus, the central bank "shouldn't wait too long with a reaction." Regarding the situation in Greece, he also said that "Grexit" would be a "catastrophe" for the country, and a "massive problem" for other euro countries.
On the data front, UK inflation data will be the main focus today. In particular, CPI is expected to slow further to 0.7% yoy in December, farther away from BoE's 2% target. That would further solidify the case for BoE to stand pat throughout 2015. UK will release RPI, PPI and DCLG house price. Released earlier today, UK BRC sales monitor dropped -0.4% yoy in December. Other data to be released include China trade balance, Japan eco watcher sentiment and US monthly budget statement.
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