U.S. Session Forex Recap – Sept. 8, 2016

  • BOC kept interest rates on hold at 0.50% as expected
  • BOC acknowledged slowdown in Q2, expects rebound for the rest of the year
  • BOC: Risks to inflation have “tilted somewhat to the downside” since July
  • Canada’s Ivey PMI down from 57.0 to 52.3 vs. 55.5 forecast
  • BOE Governor Carney: Comfortable with decision to add stimulus
  • Carney: BOE must be prepared to adjust policy as necessary
  • U.S. JOLTS job openings up from 5.64M to 5.87M vs. 5.58M forecast
  • FOMC member George: U.S. economy nearing full employment

Cautious remarks from the BOC and the BOE left the Loonie and the pound as the weakest performers of the forex bunch during the New York session.

Major Events:

More from BOE Governor Carney – Dovish remarks from Carney during the BOE Inflation Report hearings continued to drag the pound down, as he noted that the U.K. central bank should be prepared to adjust policy as necessary. He even went on to say that he’d be comfortable with a decision to add stimulus!

Carney reminded the Treasury Select Committee that the Brexit is accompanied by a great deal of uncertainty, adding that the U.K. economy would’ve probably been worse off had they not decided to add stimulus last month. Other MPC members shared this view, with Cunliffe mentioning that he’d likely vote for a rate cut if demand looks weaker than usual.

BOC interest rate decision – As expected, the Canadian central bank decided to keep interest rates on hold at 0.50% for the time being. Their official statement acknowledged that growth has slowed in Q2, primarily due to the wildfires in Alberta and lackluster export activity, but that economic performance should rebound in the second half of the year.

In particular, the BOC is expecting to see a recovery in oil production, construction in Alberta, and consumer spending for the third quarter. However, policymakers admitted that inflation risks have tilted somewhat to the downside since July, weighed down by lower consumer energy prices. Their statement also indicated some concern about housing market risks.

Not-so-downbeat U.S. updates – After seeing a few sets of weaker-than-expected economic figures, the U.S. was treated to relatively upbeat reports on Wednesday’s U.S. session. The JOLTS job openings figure was up from 5.58 million to 5.64 million, reflecting positive momentum in the labor market, instead of falling to the estimated 5.55 million figure.

Meanwhile, the Fed Beige Book noted that growth has been modest or moderate and that employment expanded at a moderate pace. Several Fed districts reported that they expect to see prices increase in the coming months, which lends potential upside for overall inflation. As for wage growth, most districts reported fairly modest gains.

Major Market Movers:

CAD – The Loonie was sold off across the boards as market watchers got wind of cautious remarks from the BOC.

USD/CAD jumped from 1.2830 to a high of 1.2914 after the BOC decision, CAD/JPY tumbled from a high of 79.14 to a low of 78.65, EUR/CAD jumped from 1.4430 to 1.4520, and NZD/CAD rose from .9590 to a high of .9650.

GBP – The pound continued to bleed after BOE officials suggested that further stimulus was still on the table.

GBP/USD is down 31 pips from 1.3368 to 1.3337, GBP/JPY slid from 135.60 to a low of 135.43, EUR/GBP is up from .8412 to a high of .8433, and GBP/AUD is down from 1.7410 to a low of 1.7372.

Watch Out For:

  • 11:50 pm GMT: Japanese current account balance (1.59T JPY expected, 1.65T JPY previous)
  • 11:50 pm GMT: Japan’s final GDP reading for Q2 (initial estimate at 0.0%)
  • 1:30 am GMT: Australia’s trade balance (-2.65B AUD expected, -3.20B AUD previous)
  • Tentative: Chinese trade balance (372B CNY expected, 343B CNY previous)
  • 5:00 am  GMT: Japanese Economy Watchers Sentiment index (45.2 expected, 45.1 previous)

See also:

London Session Recap

Asian Session Recap

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