U.S. Session Forex Recap – Jan. 21, 2016

  • BOC kept interest rates unchanged at 0.50%
  • BOC: Risks to inflation profile are balanced
  • BOC Gov. Poloz: Waiting for impact of fiscal stimulus
  • Canadian manufacturing sales up by 1.0% vs. 0.5% forecast in Nov
  • Canada’s wholesale sales increased by 1.8% vs. 0.4% forecast in Nov
  • American Petroleum Institute: Crude oil inventory up by 4.6 million barrels
  • U.S. building permits up by 1.23M vs. 1.20M estimate
  • U.S. headline CPI down by 0.1% vs. 0.0% estimate in Dec
  • U.S. core CPI up by 0.1% vs. 0.2% estimate

Is risk appetite back on? Higher-yielding currencies advanced against their forex rivals, with the Loonie ending its losing streak to the U.S. dollar during the BOC statement.

Major Events:

BOC monetary policy decision – Nope, not this time! The Bank of Canada refrained from cutting interest rates even if oil prices had been plummeting, citing that risks to Canada’s inflation profile are balanced. Policymakers acknowledged that falling commodity prices pose a setback to the Canadian economy but didn’t seem to be too concerned about a global growth slowdown just yet.

In addition, BOC officials noted in their monetary policy report that real GDP growth likely stalled in Q4 2015 and decided to lower their GDP estimate from 2.0% to 1.4% for this year. Still, BOC head honcho Poloz didn’t sound all that dovish during the press conference, as he even sounded confident that the government’s fiscal stimulus program could help keep the economy afloat.

Weak U.S. inflation figures – It looks like the start of the oil price slump last year is already starting to weigh on U.S. inflation reports, as the headline CPI indicated a 0.1% drop instead of staying flat while the core CPI showed a mere 0.1% uptick instead of the estimated 0.2% increase.

Components of the report confirmed that lower energy prices put a drag on the December CPI readings, along with falling food costs. With the Fed paying closer attention to inflation trends these days, these downbeat results might mean lower odds of a rate hike by March.

Major Currency Movers:

CAD – After weeks of being the Biggest Loser in the forex gang, the Loonie was finally able to get back on its feet when the BOC statement was less dovish than expected.

USD/CAD fell from an intraday high of 1.4690 to close at 1.4502, CAD/JPY popped up from an intraday low of 78.92 to close at 80.52, EUR/CAD retreated from the 1.6100 levels all the way down to 1.5700, and GBP/CAD tumbled to the 2.0500 major psychological mark.

JPY – Rally and reverse! The Japanese yen ended up returning its gains from earlier in the day and more when risk appetite appeared to improve during the U.S. session.

USD/JPY landed back above the 116.00 key support area and rose to a high of 117.05, EUR/JPY bounced off a low of 126.63 to close at 127.20, GBP/JPY dipped briefly below the 164.00 mark before pulling back above the 166.50 area, and AUD/JPY found support around 79.50 then closed at 80.56.

Watch Out For:

  • 12:00 am GMT: Australia’s MI inflation expectations (4.0% previous)
  • 4:30 am GMT: Japan’s all industries activity index (-0.7% expected, 1.0% previous)

See more:

Asian Session Recap

London Session Recap

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