Canadian Dollar Update December 5, 2019 – Canadian Dollar soars after hawkish BoC statement
USD/CAD Open: 1.3200-1.3201, Overnight Range: 1.3158-1.3202
Oil is at $58.86 and gold is at $1,482.60. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3208. Support is at 1.3145.
The Canadian dollar soared yesterday, following a surprisingly hawkish tone to the Bank of Canada (BoC) monetary policy statement. The BoC left interest rates unchanged, as expected but they had a somewhat optimistic economic outlook. They said, “there is nascent evidence that the global economy is stabilizing, with growth still expected to edge higher over the next couple of years.” They also said the economy was operating near capacity and that inflation would increase in the coming months. That forecast is hardly a recipe for a rate cut anytime soon.
Traders are waiting patiently for Bank of Canada Deputy Governor Timothy Lane’s speech this morning, in Ottawa. He is expected to clarify the Bank’s outlook and may downplay the optimistic outlook and focus on the economic risks. The statement pointed out that “ongoing trade conflicts and related uncertainty are still weighing on global economic activity and remain the biggest source of risk to the outlook.” If he does, USDCAD may recoup some of its losses.
Once again, the British pound outperformed the rest of the major G-10 currencies. GBPUSD rose from 1.3103 to 1.3146 as previously bearish traders unwind short positions. Price support is from expectations of a Conservative party majority and Prime Minister Boris Johnson’s plans to cut taxes.
EURUSD is reluctantly pushing higher, due to broad US dollar weakness. The single currency is struggling to obtain upside momentum because of a series of weak Eurozone and German economic reports.
USDJPY traders appeared to ignore news of another Japanese government fiscal stimulus plan. Prime Minister Abe announced plans for $120 billion in stimulus measures which are expected to boost infrastructure spending and export incentives. USDJPY traded in a narrow 108.79-108.96 range. Topside gains were limited due to soft US Treasury yields.
The OPEC meeting in Vienna is still in progress. The Cartel and Russia are expected to announce another 400,000 barrels per day in production cuts and extend the current program until the end of March. Those expectations, coupled with a 4.85 million barrel drop in US crude inventories underpinned prices.
NZDUSD was underpinned by news that the RBNZ was increasing the capital requirements for banks. US/China trade concerns weighed on AUDUSD.
Today’s US data includes weekly Jobless Claims, Trade Balance, and Factory Orders. Canada releases Ivey PMI and Merchandise Trade.
Today’s Suggested Range USD/CAD: 1.3150 – 1.3250