Canadian Dollar Update January 22, 2020 – Canadian Dollar awaiting Bank of Canada MPR
USD/CAD Open: 1.3070-1.3071, Overnight Range: 1.3035-1.3120
Oil is at $57.18 and gold is at $1,558.60. US markets are higher today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3076. Support is at 1.3031.
The Canadian dollar is marginally firmer in early Toronto trading ahead of this morning’s Bank of Canada (BoC) events. The BoC interest rate decision is mostly a non-event. Very few, if any economists, analysts, or forecasters expect the central bank to do anything but leave the overnight rate unchanged, at 1.75%. That doesn’t mean that there isn’t any risk for the Canadian dollar from the meeting-there is. It comes from the tone of the statement but more importantly, from the quarterly Monetary Policy Report outlook.
The Canadian economy slowed in the final quarter of 2019, but that was predicted by the BoC. There are concerns that they trim their 2020 Q1 growth forecast. However, the underlying theme to the two previous MPR’s were “-downside risks from trade tensions.” The signing of the US/China Phase 1 trade deal should go a long way in alleviating those tensions. If so, the MPR may be less dovish than the market expects, which could boost the Canadian dollar.
Canadian inflation data is released a couple of hours ahead of the interest rate statement. CPI is forecast to rise 2.2% y/y in December, unchanged from the November reading. Core-CPI is also expected to be unchanged at 1.9%. These readings show inflation is at the Bank’s target level, which eliminates the need to adjust rates lower.
The Canadian dollar weakened alongside its Antipodean cousins in early Asia trading, overnight. AUDUSD losses were exacerbated by weaker than expected consumer confidence data. Initially, the commodity bloc trio was weighed down by news that the coronavirus had spread to the US. Those fears dissipated after reports that Chinese authorities were on top of the outbreak. Asia losses were quickly reversed, and the Canadian dollar opened in Toronto with a small gain.
USDJPY was in demand at the Asia open, but the rally ran out of steam in Europe. A drop in US Treasury yields offset fading risk-averse sentiment from coronavirus concerns.
EURUSD inched higher at the European open but the gains quickly disappeared, and the single currency is trading unchanged from yesterday’s close.
Today’s Suggested Range USD/CAD: 1.3020 – 1.3120
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