Intraday Market Thoughts

BoJ and Keystone XL Next

by Adam Button
Nov 18, 2014 23:07

Better inflation and housing data helped the US dollar Tuesday. The euro showed some impressive resilience and was the best performer on the day while the yen lagged. The BOJ decision and the Keystone XL vote are next. A new round of GBPCAD trades had been open ahead of Tomorrow's BoE minutes and by elections in Rochester & Strood. The CAD portion the Senate vote on the Canadian pipleline. All details are in the Premium Insights.

Currencies generally traded independently on the day with no major theme taking hold.

The US dollar benefitted from PPI at +0.2% compared to -0.1% expected. The NAHB homebuilder sentiment index also climbed to 58 from 55. USD/JPY climbed back toward 117.00 after falling as low as 116.33. There is a minor double-top that has formed at 117.05.

EUR/USD found some bidders in the 1.2500 range and then sprang to 1.2540. A technical spot to watch is EUR/JPY. The euro is showing some resilience on the day, the pair gained 125 pips and made the first clear close above the 2013 high of 145.69. That's the best level since 2008 and there is very little major resistance until the 2008 high of 170.

Comments from BOE hawk McCafferty underscored some themes we will be hearing frequently in the year ahead. He said Eurozone growth was a risk, that inflation was tepid, the central bank will be patient and that the peak of the rate hike cycle will be lower than usual. His comments helped to pull back back to 1.5628 from 1.5679. Watch last week's low of 1.5595.

The kiwi took a hit on a 3.1% decline in milk prices at the latest Fonterra auction. Prices have been in near-freefall in what will be a consistent headline for a major NZ export.

The Canadian dollar was well supported despite another fall in oil prices (-$1.20 in WTI) but the Keystone XL vote in the Senate is in focus. It will take place just after 2315 GMT and will be within a vote or two of hitting 60. If it passes, look for CAD strength but it could reverse if/when Obama pledges to veto it.

Look for the BOJ meeting sometime between 0230 GMT and 0330 GMT and Kuroda's press conference at 0630 GMT. Despite the recession, it's highly unlikely the BOC will announce more easing after the surprise on Oct 31. There's also the matter of the 5-4 vote.

Act Exp Prev GMT
Producer Price Index - Output (Q3) (q/q)
0.2% -0.5% Nov 19 21:45

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