U.S. Session Forex Recap – Oct. 25, 2016

  • BOC Governor Poloz backpedals on stimulus talk
  • Poloz: Decision to cut rates again is not one to take lightly
  • Poloz: Fiscal policy eases pressure to cut, likely to stay put in next 18 months
  • SNB head Jordan: CHF is still significantly overvalued
  • Jordan: There’s room to adjust rates if necessary
  • U.S. flash manufacturing PMI up from 51.5 to 53.2 vs. 51.6 forecast
  • Fed official Bullard: No urgency to raise rates, December hike more likely

The Loonie staged a solid comeback in the New York trading session after BOC Governor Poloz clarified that they’re not likely to cut interest rates anytime soon.

Major Events:

BOC Governor Poloz downplays stimulus talk – Just a few days after BOC head honcho Poloz admitted that policymakers actively discussed adding stimulus in their recent policy meeting, he clarified in yesterday’s testimony that they’re not likely to budge anytime soon. In particular, Poloz mentioned that they might sit on their hands for the next 18 months since the government’s fiscal policy has eased the pressure to cut.

Poloz also noted that the decision to cut rates again is not to be taken lightly, explaining that monetary policy is less effective when interest rates are low. For now, the central bank is eyeing three different core inflation measures to guide the Canadian economy towards meeting its 2% inflation goal.

“Since monetary policy primarily acts on inflation through its effect on demand, measures of core inflation that move with the output gap and are largely insensitive to transitory sector-specific developments would be more effective as operational guides to policy,” the BOC noted. These indicators are the CPI trimmed mean, CPI weighted median, and the CPI common component, which you should also keep tabs on if you’re trading the Loonie.

SNB Chairman Jordan’s testimony – In his usual jawboning fashion, SNB head Thomas Jordan used his testimony as a chance to talk down the franc, warning that the Swiss currency is still significantly overvalued. For the newbies out there, lemme tell you that the SNB is infamous for intervening in the forex market to push the franc down from time to time.

Jordan added that they have room to adjust interest rates if necessary but emphasized that they’re not looking into doling out helicopter money just yet. He showed a bit of concern about the growing mortgage market, which has been partly caused by a long period of negative interest rates. On a less dovish note, he acknowledged that Swiss inflation is likely to turn positive in the coming months and that monetary policy will begin to normalize eventually.

Major Market Movers:

CAD – The Loonie was able to get back on its feet when BOC Governor Poloz suggested that they might keep rates unchanged for the next 18 months.

USD/CAD dipped from a high of 1.3390 to a low of 1.3278, CAD/JPY popped up from 77.80 to a high of 78.42, EUR/CAD fell to a low of 1.4445, and GBP/CAD slipped from a high of 1.6364 to a low of 1.6237.

See also:

London Session Recap

Asian Session Recap

Bonnie and Clyde, peanut butter and jelly, Kanye West and Kanye West. Some things just go well together.

In forex trading, you get better odds at securing pips when your fundamental analysis is complemented by technical analysis.

Head on to Big Pippin’s Daily Chart Art for some pip-locking technical setups!