CAD Drops, China PMI Next

The Canadian dollar broke parity for the first time since mid-November after officials scaled back hawkish rhetoric. The pound and kiwi were the best performers on the day. The highlight in Asia is the China PMI. Ashraf is working on the Premium Insights.

The BOC said the case for higher rates was 'less imminent than previously anticipated' while leaving the benchmark rate at 1.00%, as expected. Officials also warned that fourth quarter growth was much weaker than anticipated and cut the forecast for 2013.

USD/CAD quickly rose to 1.0004 from 0.9930 and closed the day slightly below parity.

Adding to commodity currency weakness were the quarterly forecasts from the IMF. They predicted a 0.2% contraction in Europe over the course of 2013 and downgraded their global forecast to 3.5% from 3.6%.

IMF leader Lagarde added that growth could exceed estimates if risks from Europe and fiscal consolidation do not materialize.

Shortly after the IMF headlines, the euro tumbled nearly a cent to a one-week low of 1.3264. Market watchers were scrambling to make sense of the move but no solid explanations emerged. Instead, EUR/USD slowly climbed back to end the day near 1.3315.

One near-term risk was removed on Wednesday as the US House voted to extend the debt ceiling until May 19. The Senate and White House indicated they will support the measure.

The focus now shifts to China with the flash HSBC manufacturing PMI to be released at 0145 GMT. The consensus estimate is for a rise to 51.7 from 51.5. This release often jars the Australian dollar, which remains confined to a 1.05-1.06 range.