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All eyes and ears were on the BOC statement, and it appears that most Loonie traders were disappointed by the central bank’s cautious tone.

On the flip side, the dollar locked in some gains on relatively good data and a bit more risk aversion.

  • U.S. ADP non-farm employment change up by 190K vs. 189K forecast
  • Canadian labor productivity down 0.6% vs. projected 0.4% dip
  • U.S. labor costs revised down from 0.5% to -0.2% for Q3
  • BOC kept rates on hold at 1.00% as expected
  • BOC: Will ‘continue to be cautious’ on future moves
  • BOC: Global outlook subject to considerable uncertainty
  • U.S. EIA reported draw of 5.6M barrels vs. 3.2M consensus

Major Events/Reports

More Brexit-related updates

Following a string of Brexit headlines earlier in the day, The Telegraph released a report citing that European Commission President Juncker feared a collapse of PM May’s government could happen soon.

Note that Juncker has already extended the deadline for May to settle the debate on the Irish border, an issue that has kept Brexit negotiations deadlocked for weeks already. On the home front, MPs are also warning that May could get booted if they don’t start trade talks immediately.

On a less downbeat note, Irish leader Varadkar stressed the importance of having no hard border in Northern Ireland, backing PM May on her stance and adding that she is acting in good faith.

BOC interest rate statement

As expected, BOC policymakers sat on their hands and kept rates unchanged at 1.00%. However, the latest statement was considered less hawkish than expected.

For one, Governor Poloz reiterated that they will “continue to be cautious” on rate moves and will look at incoming data for guidance. Officials noted that the global outlook is subject to considerable uncertainty, particularly when it comes to trade policies *cough* NAFTA *cough* and geopolitical risks.

Although their current assessment of the Canadian economy was mostly positive as they highlighted stronger than expected Q3 growth and strong hiring data, policymakers also warned that some indicators reflected labor market slack and that growth could moderate.

But what probably drew more Loonie bears in was the slight shift in wording in the final paragraph, which previously indicated:

Based on this outlook and the risks and uncertainties identified in today’s MPR, Governing Council judges that the current stance of monetary policy is appropriate. While less monetary policy stimulus will likely be required over time, Governing Council will be cautious in making future adjustments to the policy rate.

And now shows (emphasis mine):

Based on the outlook for inflation and the evolution of the risks and uncertainties identified in October’s MPR, Governing Council judges that the current stance of monetary policy remains appropriate. While higher interest rates will likely be required over time, Governing Council will continue to be cautious, guided by incoming data in assessing the economy’s sensitivity to interest rates…

Mixed U.S. economic data

Uncle Sam’s numbers turned out mixed, with a few greens and reds here and there. The ADP non-farm employment change came in a bit better than expected at 190K versus the 189K consensus but still lower than the previous 235K gain.

Meanwhile, the revised labor costs for Q3 suffered a downgrade from the previously reported 0.5% increase to a 0.2% decline, reflecting weaker wage pressures. Non-farm productivity for the same period, on the other hand, was maintained at 3.0%.

Wall Street ended mostly in the red for the day, even as the tech sector recovered from losses earlier in the week.

  • Dow 30 index is down 39.73 points to 24,140.91 (-0.16%)
  • S&P 500 index is down 0.30 points to 2,629.27 (-0.01%
  • Nasdaq is up 14.16 points to 6,776.38 (+0.21%)

U.S. bond yields are mostly in the red as well.

  • 30-year yield is up to 2.730% (+0.44%)
  • 10-year yield is down to 2.340% (-0.67%)
  • 5-year yield is down to 2.126% (-1.15%)

Major Market Mover(s):

CAD

A combination of weaker oil prices and a less-hawkish BOC statement pushed the Loonie lower across the board.

USD/CAD is up from 1.2657 to a high of 1.2807, CAD/JPY slipped to a low of 87.67, CAD/CHF is down to a low of .7723, and EUR/CAD popped back above the 1.5100 handle.

GBP

The pound ticked slightly higher possibly on some profit-taking after its tumble during the previous session as PM May and Irish leader Varadkar stressed the importance of reaching a border deal pronto.

GBP/USD pulled up from a low of 1.3359 to a high of 1.3400, GBP/JPY paused from its drop at 149.86 and bounced to 150.24, GBP/CAD is up to 1.7117, and GBP/AUD is holding on to the 1.7700 handle.

USD

The Greenback was mostly supported for the rest of the session by both good economic data and risk-off flows.

EUR/USD is down from a high of 1.1834 to a low of 1.1780, USD/JPY rebounded from the 112.03 to 112.38, AUD/USD slipped to .7565, and NZD/USD is down to a low of .6870.

Watch Out For:

  • 12:30 am GMT: Australia trade balance (surplus to narrow from 1.75B AUD to 1.37B AUD)
  • 5:00 am GMT: Japanese leading indicators (dip from 106.4% to 106.2% expected)