U.S. Session Forex Recap – Mar. 10, 2016

  • BOC kept interest rates unchanged at 0.50% as expected
  • U.S. crude oil inventories up by 3.9 million barrels vs. 3.0 million forecast
  • RBNZ cut interest rates from 2.50% to 2.25%

Forex price action was all over the place, as European currencies advanced while the Loonie and Kiwi were driven by central bank decisions. Here’s how it turned out.

Major Events:

BOC monetary policy decision – As expected, BOC Governor Poloz and his gang of policymakers decided to keep interest rates on hold at 0.50%, citing that the economy is making good progress. In particular, their statement highlighted the pickup in exports and the rebound in crude oil, adding that the government’s fiscal stimulus package could lead to more improvements.

“The global economy is progressing largely as the bank anticipated in its January Monetary Policy Report,” the BOC shared in its official statement, which indicated that they’re no longer too worried about a major meltdown as they were in the past. Of course, BOC officials still had a few concerns on their list, including weakening business investment and high levels of household debt, but their announcement was seen to be relatively upbeat overall.

RBNZ interest rate decision –  U.S. session forex traders had a pretty good reason to stay overtime, as the RBNZ dropped a bombshell on the markets with its surprise interest rate cut from 2.50% to 2.25%. Granted a few analysts actually saw this coming, but the consensus was actually for the New Zealand central bank to sit on its hands.

Instead, RBNZ head Graeme Wheeler stepped heavily on the dovish pedal by adding that further easing moves might be needed to bring inflation back to their target levels. Policymakers noted that weaker growth in China, emerging markets, and in Europe is weighing on commodity prices, posing a huge challenge to their dairy sector.

Major Currency Movers:

CAD – The Loonie got back on its feet after getting knocked down yesterday, rallying on a relatively upbeat BOC statement.

USD/CAD broke below the 1.3300 handle to a low of 1.3271, CAD/JPY rallied to a high of 85.61, NZD/CAD fell more than 200 pips to the .8800 handle, and EUR/CAD is down to 1.4575 again.

NZD – The Kiwi had its wings clipped when the RBNZ announced its rate cut and added that further cuts are possible.

NZD/USD fell from resistance near .6800 to a low of .6635, NZD/JPY dropped from 77.00 to test support at 75.00, EUR/NZD popped up to the 1.6550 minor psychological mark, and GBP/NZD gapped up to the 2.1400 levels.

Watch Out For:

  • 12:00 am GMT: Australia MI inflation expectations (3.6% previous)
  • 1:30 am GMT: Chinese CPI y/y (1.8% expected, 1.8% previous)
  • 1:30 am GMT: Chinese PPI y/y (-4.9% expected, -5.3% previous)

See also:

Asian Session Recap

London Session Recap

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