Canadian Dollar Update December 12, 2019 – Canadian Dollar rallies post FOMC
USD/CAD Open: 1.3172-1.3173, Overnight Range: 1.3162-1.3191
Oil is at $59.34 and gold is at $1,473.70. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3215. Support is at 1.3153.
The Canadian dollar rallied ahead of and then after yesterday’s FOMC policy meeting statement. The FOMC left interest rates unchanged which was universally expected, as was the dovish policy statement. The Committee members are predicting that the Fed Funds rate will stay in the 1.50%-1.75% range for all of 2020. They justified their decision by saying the “labor market remains strong and that economic activity has been rising at a moderate rate.” They did note some concerns, albeit mildly when they wrote: “Although household spending has been rising at a strong pace, business fixed investment and exports remain weak.” The decision to leave rates unchanged was unanimous.
The dovish statement gave the green light to US dollar bears and the greenback was sold against all the major G-10 currencies. However, the magnitude of the dollar’s losses may have been exaggerated because of the time of year. December is year-end for many global banks and international corporations. They are in the process of closing their books for the year, which sharply reduces FX liquidity.
FX price action was very quiet overnight due to three major concerns: 1) ECB policy meeting and press conference today, 2) UK election, 3) proximity to December 15 when the US has said it will raise Chinese tariffs by 15%.
Today’s ECB meeting should be a non-event. The ECB is expected to leave rates and guidance unchanged. The Swiss National Bank left interest rates unchanged at -0.75% at their policy meeting today. They said they would intervene in FX markets as required to protect the Swiss franc from unwarranted increases. They also noted that international trade tensions and political uncertainty were weighing on the global economy. The comments were not unexpected, and the FX reaction was muted.
It is election day in the UK. GBPUSD traded erratically in a 1.3150-1.3228 range today.
President Trump delayed a planned 15% hike in tariffs on Chinese imports until December 15, in hopes of securing a Phase 1 trade deal. The deadline is fast approaching. Trump and his senior advisors are reportedly meeting today with some speculating that the tariffs will be implemented as planned. Officials from both sides claim that a deal is close although China’s demand that all tariffs be rolled back is supposedly the sticking point.
Canadian dollar traders will be hoping for some clarity from BoC Governor Stephen Poloz’s lunch-hour speech, today.
Today’s Suggested Range USD/CAD: 1.3120 – 1.3220