Tag Archive: Bank of Canada

Dollar Consolidates but Adjustment is Not Over

2024-04-11

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2024-04-11

Overview:  Higher than expected US CPI for the third consecutive month drove US interest rates sharply higher and lifted the greenback broadly. The market appears to be catching its proverbial breath today, but the shallow consolidation suggests the moves are not over.

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Dollar Consolidates Softer Ahead of Tomorrow’s CPI

2024-04-09

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2024-04-09

Overview: The dollar is trading with a softer bias in mostly narrow ranges against the G10 currencies. It did not rally much ahead of the US jobs data, and it was not able to sustain the upside momentum afterwards, despite the jump in US yields. Former St. Louis Fed President Bullard, who still has a strong reputation in the market, told Bloomberg TV yesterday that three cuts were his base case this year. The Scandis and Antipodeans are the...

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Forex Becalmed with the Greenback Mostly Firmer in Narrow Ranges

2024-03-05

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2024-03-05

(Business trip will interrupt the commentary over the next few days.  Check out the March monthly here.  Back with the Week Ahead on March 9. May have some comments on X @marcmakingsense.) Overview: Outside of the Australian and New Zealand dollars, which are off by 0.20%-0.25%, the other G10 currencies are little changed and mostly softer in narrow ranges. A firm Tokyo CPI, mostly on base effects and softer rates helped keep the US dollar below...

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China’s CSI 300 Rises for Seventh Consecutive Session and Offshore Yuan Strengthens for the Sixth Session

2024-02-21

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2024-02-21

Overview: The dollar is trading quietly after being sold yesterday. It is still soft against the dollar bloc and the Swiss franc but is firmer against the other G10 currencies. Narrow ranges have dominated. Emerging market currencies are mixed, with central European currencies and the Taiwan dollar trading softer. The offshore Chinese yuan is firmer for the sixth consecutive session. The highlights of today's North American session features minutes...

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Attention turns to Lagarde’s Press Conference and US Q4 GDP

2024-01-25

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2024-01-25

Overview: The US dollar is trading mostly quietly in narrow ranges against the G10 currencies ahead of the ECB's President Lagarde's press conference at the conclusion of the policy meeting and the first estimate of Q4 US GDP. With elevated price pressures, Norway's central bank left rates steady and reiterated its signal that rates will remain high for some time, and this has lifted the krone by about 0.5% to leader the major currencies. Most of...

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PBOC Cuts Reserve Requirements, but USD Pullback may offer New Buying Opportunity in North America

2024-01-24

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2024-01-24

Overview: After a strong showing yesterday, the dollar was sold in Asia and Europe. China announced a cut in reserve requirements and took more informal action to support the stock market, which encouraged risk-taking. Yet, the dollar's decline has stretched intraday momentum indicators, which may provide early operators in North America a new dollar buying opportunity. The ECB and Norway's central banks meet tomorrow, and the US reports its first...

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Markets Catch Collective Breath

2023-12-06

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2023-12-06

Overview: The US dollar is mixed today. The dollar-bloc currencies are firmer, while the euro and yen are softer. We had anticipated a recovery of the dollar on ideas that the market has too aggressively pushed down US rates, and pricing in more Fed easing with higher confidence than seems to be warranted by the recent data.  However, US rates have not recovered, but the dollar has.  Partly, this reflects that rates have fallen as faster if not...

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Tensions Run High Ahead of ECB Meeting and US Q3 GDP as JPY150 Breached

2023-10-26

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2023-10-26

Overview: The market is on edge. Anxiety is running higher. It is partly geopolitics, and it is partly market stresses. The dollar is holding above JPY150 but so far, no reports or signs of intervention. Bank shares are under pressure. An index of Japanese banks has fallen for five of the past six sessions and are off about 8% from the year's high set last month. An index of European bank shares has fallen in six of the past seven sessions and...

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Divergence Continues to Underpin the Greenback

2023-10-25

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2023-10-25

Overview: The divergence reflected in the flash PMI readings seen yesterday underpinned the dollar, which is firmer in mostly quiet turnover. The initial Australian dollar gains scored in response to the slightly less decline in Q3 CPI have been unwound. The greenback also remains within striking distance of JPY150 where there are still some large options and some apprehension over possible BOJ intervention. Hungary's larger than expected rate cut...

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Battle for $1.07 in the Euro

2023-09-07

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2023-09-07

Overview: Despite disappointing German industrial output, where the 0.8% decline was twice expectations, the euro is holding above $1.07, where large options exist that are expiring over the next few sessions. The greenback is consolidating against the Japanese yen, where the fear of intervention has increased. Sterling remains on its back foot after yesterday's seemingly dovish comments by Bank of England Governor Bailey. Emerging market...

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Dollar Sell-Off is Getting Stretched

2023-07-13

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2023-07-13

Overview: Softer-than-expected US CPI, following weaker than expected job growth has sent the greenback tumbling. The dollar is stabilizing against the yen today, but the downside momentum is intact against the other major currencies. The euro approached $1.1175, sterling $1.3080, and the greenback slumped to almost CHF0.8615. The Australian dollar reached $0.6850, and the New Zealand dollar tested $0.6360. The Canadian dollar, often a laggard in a...

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US CPI and Bank of Canada Highlight North American Session

2023-07-12

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2023-07-12

Overview: The US dollar's losses have been extended ahead of the June CPI. At the same time, speculation that the Bank of Japan will adjust policy later this month saw the yen extend its gains for the fifth consecutive session. Sterling made new highs since last April, while the Swiss franc has risen to its best levels in about 2 1/2 years. The Dollar Index gapped lower and through the trendline drawn off the April and May lows. The greenback has...

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Japan’ Q1 GDP was Revised Up, While the Eurozone’s was Revised Down

2023-06-08

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2023-06-08

Overview: The back-to-back surprise rate hikes by the Australia and Canada spurred speculation that the Fed could hike next week, and this lifted US rates and helped the dollar recover. The odds of a hike increased, according to the indicative pricing in the Fed funds futures market from about a 20% chance to a little above 35%. now. At yesterday's high, the two-year yield was up a little more than 25 bp since the low before the US employment data...

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RBA Surprises with a Quarter-Point Hike and German Factory Orders Disappoint

2023-06-06

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2023-06-06

Overview: The Reserve Bank of Australia surprised many with a quarter-point hike and German factory orders unexpectedly fell. Reports suggest that China has asked banks to cut deposit rates. The next result is the Australian dollar is the strongest currency in the G10 and helped lift the Canadian dollar ahead of the Bank of Canada meeting tomorrow. Australian stocks sold off (~1.2%) while large markets outside of China rose in the region. Europe's...

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US Dollar Slumps and China Surprises with Twice the Expected Trade Surplus

2023-04-13

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2023-04-13

Overview:  The market took US short-term rates and the dollar lower after the CPI data, which was largely in line with expectations. On the one hand, the odds of a quarter-point hike next month increased slightly (73.6% vs. 71.6%) to 5.25%, but it reinforced that sense that it is last hike and that the Fed will unwind this hike and more before the end of the year. The year-end implied policy rate fell by about six basis points to 4.33%. The dollar...

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US CPI is Unlikely to Tell Us Anything We Don’t Already Know

2023-04-12

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2023-04-12

Overview:  Today's highlight is the March US CPI, and while everyone is talking about it, it is unlikely to tell us anything we do not already know. Headline price pressures are easing but the core rate is sticky, and despite comments from the Chicago Fed president about the need for patience, the odds of a hike next month have crept up. Understanding the Fed's reaction function, it seems clear that for most officials, inflation is remains too high...

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Yen Jumps Despite Poor GDP Ahead of Tomorrow’s BOJ Outcome

2023-03-09

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2023-03-09

Overview: Seeing the drama he inspired on Tuesday, the Fed chair tried soft-pedaling the idea that he was signaling a 50 bp hike in March. The market did not buy it. And the odds, discounted by the Fed funds futures rose a little above 70% from about 62% at Tuesday's close. The two-year note yield solidified its foothold above the 5% mark. With the Bank of Canada confirming its pause, the Reserve Bank of Australia does not seem that far behind, and...

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Powell Sends the Two-Year Yield above 5% and Ignites Powerful Dollar Rally

2023-03-08

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2023-03-08

Overview:  Federal Reserve Chair Powell's comments to the Senate Banking Committee were seen as hawkish by the market, even though it has been clear to most observers that the 5.10% median terminal rate that the Fed projected in December would be increased. Also, it seemed well appreciated a few Fed officials support a 50 bp hike at the February 1 FOMC meeting, two days before a "hot" jobs report that showed over 500k jobs were filled. It...

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US Dollar is Better Bid Ahead of Powell, while Aussie Sells Off on Dovish Hike by the RBA

2023-03-07

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2023-03-07

Overview: The US dollar is trading with a firmer bias against nearly all the G10 currencies ahead of Federal Reserve Chairman Powell's semi-annual testimony before Congress. Speaking for the Federal Reserve, the Chair is likely to stay on message which is higher rates are necessary to cool the overheating economy. This comes on the heels of the Reserve Bank of Australia's 25 bp hike and indication that it is not pre-committing to an April hike. The...

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Yields Pull Back to Start the New Week

2023-03-06

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2023-03-06

Overview: The modest economic goals announced as China's National People's Congress starts was seen as a cautionary sign after growth disappointed last year. It seemed to weigh on Chinese stocks, though others large bourses in the region advanced, led by Japan's Nikkei and South Korea with gains of more than 1%. Europe's Stoxx 600 is little changed after rising for the past two sessions. US index futures are slightly softer. Strong gains were seen...

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