USD/CAD: Trades Above 1.2450 After BoC Statement
MarketPulse | May 28, 2015 01:09AM ET
The USD/CAD continues to climb higher as the USD rally keeps gathering momentum. The week started with a holiday for the U.S. and parts of Europe that resulted in thin volume. Yesterday with all markets online the USD started where it left off on Friday. Federal Reserve Chair Janet Yellen’s comments continued to boost the USD that benefited from European uncertainty on the Greek debt front. The Bank of Canada rate statement was never intended to defend the CAD’s position as all forecasts called for the interest rate to remain unchanged at 0.75 percent.
The Bank of Canada did just that. The BoC made change to monetary policy and an optimistic statement regarding the economy. Risks to the Canadian economy are elevated according but the central bank is ready to act if they pose a bigger threat. The BoC is happy with current retail sales figures and inflation is on the lower end of their target, which means their monetary policy is appropriate.
The USD/CAD made another attempt at breaking the 1.25 price level only to be contained as options could be triggered if that level is touched. USD strength will continue until more economic data is released that could deflate the big dollar. Friday’s second gross domestic product release for the first quarter of 2015 could have that effect. The market is already pricing a huge disappointment that has been caused by “transitory” factors is the Federal Reserve is reading the economy right. The GDP figure on Friday is estimated to validate the underwhelming performance of the first quarter, but any surprise could have an impact to the USD/CAD as Canada will release its monthly GDP data.
The Bank of Canada statement was fairly neutral to the loonie in a week where the Canadian economy will have limited opportunities to convince the market one way or the other. The central bank put most of the negative onus on outside factors such as the weak growth of the U.S. in the first quarter. The strength of the loonie due to higher energy prices was mentioned briefly but the topic of brent crude did not get further ink from the BoC.
Get The News You Want
Oil has fallen of its perch in the last month as demand has been steady and production is still at record high. Black gold has proven to be for the most part disconnected from military turmoil and it seems the rally in crude was boosted by paper barrels rather than real ones. The rise of the USD has given crude no way to go but down. Lower crude prices will pressure the CAD further down as well, which is something that is needed for the export led recovery expected by the Bank of Canada.
The market is awaiting further evidence that there is truth to the BoC’s optimistic forecast on the Canadian economy. An interest rate hike could still be needed towards the end of the year in order to stimulate the economy which would drive the loonie even lower versus the USD.
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.