The lack of top-tier economic data on schedule left major currencies sensitive to remarks from central bank officials in today’s New York session. Risk-taking also came into play as crude oil and U.S. equity indices closed in the green.
- U.S. pending home sales down by 0.8% vs. projected 1.0% rebound
- U.S. crude oil stockpiles up by 0.1M barrels vs. projected 2.1M decline
- BOE head Carney: Some removal of stimulus likely
- Carney: MPC to discuss the idea of raising rates in the coming months
- Carney: Hike depends on consumption, business investment, wages
- BOJ head Kuroda: Monetary policy can support structural reform
- Kuroda: Investment remains weak despite strong earnings
- BOC official Patterson: Crude oil shock is behind us
Central bankers run the show
The spotlight is still on monetary policy today as a few central bank officials shared their thoughts on their respective economies and potential rate changes.
BOE Guv’nah Carney shed his dovish feathers from his earlier testimony, affirming that some removal of stimulus is likely if spare capacity continues to erode. He acknowledged that the committee has limited tolerance for above-target inflation and said that they will discuss issues pertaining to hiking interest rates in the coming months.
On a more prudent note, Carney also mentioned that their readiness to tighten hinges on whether weak consumption overshadows the pickup in investment. Keep in mind that consumers have been feeling the pinch of higher price levels, dampening U.K. retail sales and potentially overall GDP growth. Apart from that, Carney added that they’ll also keep tabs on wage growth and Brexit concerns when debating rate hikes.Next up, BOJ head honcho Kuroda struck a less upbeat tune when he admitted that Japanese firms remain cautious about investing their earnings into wages. This could keep a lid on inflationary pressures even as domestic demand picks up, thereby discouraging the central bank from removing stimulus for the time being.
Lastly, BOC official Patterson added fuel to the hawkish fire started by Wilkins and Poloz a few days back. She said that the economic shock of the drop in crude oil to the Canadian economy has already passed, likely as The Great White North has shifted to other sources of growth.
When it came to inflation, she admitted that it’s still running below their 2% target and that their primary mandate is to get it up to that level. She did say that there’s some differentiation between goods and services inflation but that growth has broadened to several industries.
Rise in crude oil stockpiles
The numbers from the Energy Information Administration showed a smaller buildup in stockpiles of 0.1 million barrels compared to the API figure of 0.8 million barrels. Although this is still a surprise relative to the estimated draw of 2.1 million barrels, crude oil junkies still interpreted it as a better than expected figure.
- WTI crude oil is up to $44.84 per barrel (+1.36%)
- Brent crude oil recovered to $47.63 per barrel (+1.51%)
Wall Street cheered these gains in commodities, with indices closing in the green as well. Banking and tech shares drove most of the gains.
- S&P 500 index is up to 2,440.00 (+0.81%)
- Dow 30 index closed at 21,454.61 (+0.68%)
- Nasdaq is up to 5,765.88 (+1.57%)
Major Market Mover(s):
The Loonie continued to rake in gains after another BOC official highlighted the improvements in the Canadian economy and hinted at potential rate hikes.
USD/CAD edged down to 1.3038 (-1.22%), EUR/CAD is down to 1.4833 (-0.88%), NZD/CAD tumbled to .9524 (-0.70%), and AUD/CAD dropped to .9960 (-0.47%).
USD & JPY
The lower-yielding duo caved to their higher-yielding counterparts as traders were in the mood for more risk.
USD/CHF dropped from .9605 to .9596 (-0.08%), GBP/USD popped up to 1.2925 on Carney’s turnaround (+0.87%), and AUD/USD is up to .7638 (+0.75%).
CAD/JPY climbed to 86.12 (+1.17%), AUD/JPY is up to 85.80 (+0.74%), and NZD/JPY is testing resistance at 82.00 (+0.49%).
Watch Out For:
- 11:50 pm GMT: Japanese retail sales y/y (2.6% expected, 3.2% previous)