CAD: Positive momentum disrupted by the BoC’s Monetary Policy Report - MUFG

Sandeep Kanihama FXStreet Contributor

Derek Halpenny, European Head of GMR at MUFG, suggests that the positive momentum for CAD has been disrupted by the BoC’s update Monetary Policy Report on Wednesday that clearly signalled greater risks of additional monetary easing going forward.

Key Quotes

“We now think the BoC will ease its monetary stance at its next meeting on 7th December given the views expressed in the report. The delay further of the point when the BoC expects the full removal of spare capacity to the middle of 2018 from the end of 2017 is strong justification in itself for action at that meeting.

The Bank of Canada cut its real GDP projections for 2016 and 2017 in part due to disappointing non-energy exports. There remain doubts over the competitiveness of the Canadian economy and this problem is captured by the fact that Canada’s current account deficit remains problematic at 3.4% of GDP.

Further monetary easing may be seen as beneficial in providing another leg lower for CAD. An easing in December a week before a hike from the Fed should be a powerful force for a further lift in USD/CAD, especially given the spot rate is already lagging based on the 2-year US-CA swap spread. Any surprise undershoot in the inflation data today would fuel a bigger CAD downside move given the BoC stance expressed this week.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.