– Traders ignore news that BoC left rate on hold.
– Bank of Japan gearing up to end negative rate policy.
– US dollar opens with gains expect against soaring yen.
USDCAD: open 1.3586-90, overnight range 1.3584-1.3608, close 1.3593, WTI $69.98, Gold, $2033.76
Canadian dollar traders were not impressed when the Bank of Canada (BoC) monetary policy statement was released, and then the news was forgotten.
The BoC did not surprise anyone when they left rates unchanged at 5.0%. That result was nearly universally expected. The debate, and it was a minor one at that, was if the policy statement was hawkish, dovish, or whether it mattered at all.
Many economists consider the BoC’s actions to be a “hawkish hold” because the statement warned that the Bank “remains prepared to raise the policy rate further if needed.” That’s because they are worried about rising wages, sticky inflation, and concerned about the risks to their inflation outlook.
Those thinking the statement was a tad dovish cite statements highlighting a slowing in economic momentum, a cooling labor market, and a tick higher in the unemployment rate.
The final result was that Wednesday’s USD/CAD close was unchanged from Tuesday’s.
The Canadian dollar is not getting any support from oil prices. OPEC’s grand announcement on November 30, that they would increase the existing 1.3 million barrel per day production (bpd) cut by another 900,000 bpd, appears to be a resounding flop, barely one week later.
West Texas Intermediate (WTI) prices have plunged 11.6% since the news. WTI fell to $69.28 from $70.41, despite the EIA reporting U.S. crude inventories fell by 4.6 million barrels last week.
The Canadian dollar struggled to make headway due to weaker than expected ADP employment data, which showed the U.S. only gained 103,000 new jobs in November, compared with the forecast for a 130,000 gain. The news was music to the ears of bond traders who drove the U.S. 10-year yield down to 4.10% from 4.20%.
The outlook for Japanese interest rates was front and center overnight after comments from Bank of Japan Governor Ueda. He broached the subject of exiting Japan’s negative interest rate policy with the Prime Minister and parliament, specifically saying that his job “would get more challenging by month-end.” Traders ramped up bets for a December 19 rate hike, and USD/JPY plunged, falling from 147.32 to 144.55.
European FX markets traded narrowly and within yesterday’s ranges. Traders are unwilling to get involved ahead of Friday’s NFP data.
Today’s U.S. data includes Challenger job cuts and weekly jobless claims