U.S. markets were closed for a day of mourning for late President George H.W. Bush and most economic releases were pushed a day later, so there wasn’t much action on dollar pairs.
The Canadian dollar was under the spotlight as the BOC made its monetary policy decision and wound up sharing a less upbeat view of the economy. There was also a lot of chatter on OPEC members being on board with curbing production, but that did little to prop crude oil up.
- Bank of Canada kept interest rates on hold at 1.75% as expected
- BOC: Canadian economy has less momentum going into Q4
- BOC expects inflation to ease due to lower gasoline prices
- Fed Beige Book: Most districts expanded at a moderate pace
- Oman’s oil minister: All OPEC members seem on board for an output cut
- Russia, Nigeria, and Libya to participate in OPEC+ cuts
- Iran seeking exemption from output deal due to sanctions
BOC rate decision
As everyone and his momma expected, the BOC kept interest rates on hold at 1.75% after previously hiking by 0.25% in their October announcement.
Market watchers found the latest decision to be less hawkish than usual, as the official statement highlighted risks related to the sharp slide in crude oil and trade tensions.
In particular, the central bank pointed to factors such as “geopolitical developments, uncertainty about global growth prospects, and expansion of U.S. shale oil production” that are weighing the commodity down. The BOC also blamed trade uncertainty for dragging business investment down in the third quarter.
With that, the BOC acknowledged that the Canadian economy has slower momentum heading into the last quarter of the year and that inflation could ease more than projected. Still, policymakers noted that rates will need to rise to a neutral range in order to achieve the inflation target but that:
“The appropriate pace of rate increases will depend on a number of factors. These include the effect of higher interest rates on consumption and housing, and global trade policy developments.”
OPEC cut chatter
On the subject of crude oil declines, the Black Crack Mafia seems to be scrambling to prevent the commodity price from falling any further. Oman’s oil minister Mohammed bin Hamad Al Rumhi shared that the cartel and its allies could discuss production cuts as the JMMC recommended.
Recall that the OPEC already has a deal to cut production by 1.8 million barrels per day in force since January last year, but this agreement is due to expire soon.
A new one could be made in their upcoming meeting but this would likely be just a short-term one, possibly lasting three to six months only. Also, word through the pipeline is that the cuts would be smaller at around 1M to 1.5M barrels per day.
Still, Al Rumhi also mentioned that most members are on board, including Nigeria and Libya. Russia, which is a non-OPEC member but is a major oil producer, is reportedly participating in the output cuts as well.
Major Market Mover(s):
The Loonie found itself behind its peers when investors pared BOC rate hike bets upon hearing the latest monetary policy statement.
USD/CAD jumped from 1.3284 to 1.3399; CAD/JPY fell from 85.14 to 84.55; EUR/CAD is up to 1.5192; GBP/CAD climbed from 1.6935 to 1.7070, and AUD/CAD is up to .9706.
Watch Out For:
- 12:30 am GMT: Australian retail sales m/m (0.3% gain expected, 0.2% previous)
- 12:30 am GMT: Australia’s trade balance (larger surplus of 3.10B AUD eyed)
- 1:15 am GMT: FOMC member Quarles’ speech