U.S. Session Forex Recap – Jan. 22, 2015

  • BOC surprisingly cuts rates by 25 bps, lowers 2015 inflation projections
  • Is the ECB about to propose a 50 billion EUR monthly stimulus?
  • US housing starts: 1.09M vs. 1.04M expected and previous
  • US building permits: 1.03M vs. 1.06M expected, 1.05M previous
  • CA wholesale sales: -0.3% vs. 0.2% expected, 0.1% previous

Central bank alert! Thanks to announcements by ECB and BOC officials, forex traders saw volatility throughout the U.S. session.

The biggest story of the hour was the Bank of Canada’s (BOC) surprising move to cut its interest rates from 1.00% to 0.75%, its first change since September 2010. BOC Governor Stephen Poloz said that it was a “one-time move” in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada. If you recall, oil prices have dropped by as much as 30% since the BOC’s last meeting. Not good for an oil exporter economy, eh?

The central bank had also lowered its 2015 inflation forecasts to 1.2% from 1.8% in October, and dropped its Q4 2015 growth projections from 2.4% to 1.9%. Q4 2016’s growth estimates were revised from 2.2% to 2.5% though, since the BOC believes that strong U.S. growth would carry over to its neighboring economy.

USD/CAD shot up by a ridiculous 322 pips (+2.67%) to 1.2394 before it settled at 1.2337. Meanwhile, CAD/JPY registered a 182-pip drop (-1.87%) throughout the session; EUR/CAD rocketed by 307 pips (+2.20%), and AUD/CAD hit a high of 1.0086 before settling back to .9979. Yowza!

The Loonie wasn’t the only market mover though. The euro also got some action thanks to a Wall Street Journal citing “sources” that the ECB would propose a 50 billon EUR stimulus every month through 2016. The euro shot up across the board, but eventually encountered selling on profit-taking and a lack of confirmation.

EUR/USD rose to a session high of 1.1678 before closing at 1.1588, while EUR/GBP jumped by 48 pips (+0.63%) to .7713 before settling back at .7658. EUR/JPY managed to keep its gains though, as it closed 37 pips higher (+0.27%) to 136.52.

Will yesterday’s Loonie price action affect the Aussie and Kiwi’s prices? Asian session forex traders only have a couple of low-tier reports to handle, including New Zealand’s business manufacturing index (printed at 57.7 vs. 55.6 previous) and Australia’s MI inflation expectations and HIA new home sales data scheduled at 1:00 am GMT. These reports don’t usually cause sustained moves for the comdolls, so keep an eye out for other catalysts that might affect your Asian session trades!

See also:

London Session Recap

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