Central Bankers Whipsaw Markets
|Central Banks were again the focus as latest comments from the Bank of England sparked a risk-on tone that helped lift GBP and US Equities.
GBPUSD climbed the most since April on comments made by Bank of England Governor Carney stating that “the Monetary Policy Committee may need to begin removing stimulus”. This was a major change from Governor Carney’s comments last week that “now was not the time to start the tightening process”. Because of this about-change GBP against USD was the recipient of a 1.2% gain on the day trading as high as 1.29717 – the biggest one day move since the snap election was called on April 18th. Overnight GBP has remained bullish reaching a high of 1.29942 in early trading this morning trading currently at 1.2985.
EURUSD was also the recipient of some “whip-saw” action on Wednesday as the previous hawkish tone of ECB President Draghi Tuesday comments were, per Central Bank officials, misinterpreted as Draghi commented that “deflationary forces have been replaced by reflationary ones”. Three Eurosystem officials stated “what was perceived as hawkish was really meant to strike a balance between recognizing the bloc’s economic strength and warning that monetary support is still needed”. Following Draghi’s comments EURUSD saw a dramatic sell off from around 1.1380 down to 1.1291 before retracing back to reach a new daily high of 1.1390 – not seen since June 2016. EURUSD has now broken the psychological 1.14 area trading as high as 1.14322 this morning.
Following the latest EIA Crude Oil Inventories report on Wednesday, that showed an increase of 0.118M compared to the consensus forecast of a decrease of 2.585M, WTI advanced higher to trade up to $44.91pb a 1.3% increase on the day. Brent was only slightly lagging gaining 1.1% on the day to trade up to $47.56pb. The price increase is moving away from the $40pb area thought to be a major psychological support. WTI and Brent are currently trading at $45.30 and $48.00 respectively in early trading.
CAD remains strong against USD gaining 0.63% yesterday to trade as low as 1.3047 as the Bank of Canada Governor Poloz’s recent comments has resulted in the Canadian OIS showing the possibility of a July rate increase climbing to nearly 70%. USDCAD has continued lower overnight with it currently trading at 1.3012 slightly above the low set this morning at 1.30065.
Gold climbed for a second day rising to trade as high as $1,254.65 before retracing back to currently trade at $1,250.
At 13:30 BST today will see the release of US Initial Jobless Claims and Annualized Gross Domestic Product – more data to determine if the US economy is on a strong trajectory. Note that Federal Reserve Member Bullard is scheduled to speak at 18:00 BST so we may get even more rhetoric on the state of the US economy.
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