BOC Flips the Switch

A quick look at the USD/CAD chart shows how seriously the market took a hint from Bank of Canada senior deputy Wilkins today. The loonie was the top performer while the pound lagged. Australian business confidence is due later. The Premium video below dissects the technical and fundamental forces underpinning the British pound, inlcuding our GBP trades.

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Any time a central banker's comment leads to a 150 pip fall in a currency it's serious but when it leads to a six-week low, a break of the 100-day moving average and a break of the 200-dma, it's especially notable.

That's what happened after Wilkins said the BOC is rethinking whether the 50 basis points in rate cuts since 2015 is still needed. She painted an upbeat picture of the economy that was already evident after GDP rose at a 3.7% annualized pace in Q1 and the economy added 54.5K jobs in May. Wilkins was almost unequivocal in her praise for an economy where she said signs of growth are broadening.

The implied probability of a hike by year-end rose to 58% from 29% on her comments. That kind of swing is rare and underscores the downside for USD/CAD. In addition, note that longs in the pair a sliver away from record extremes and are surely feeling uncomfortable.

Another place where central bankers have been feeling upbeat is Australia. The RBA last week brushed aside a soft Q1 and one of the reasons is upbeat consumer and business sentiment. We will get the next look at 0130 GMT when NAB releases its business confidence data for May. The prior reading was +13.