Poloz to the Sidelines, EUR to the Pits

The surprise on Wednesday wasn't so much that the Bank of Canada held rates but the hint that no more rate cuts are coming. The Canadian dollar was the top performer while the euro was caught in wave of US dollar buying. Australian retail sales and trade balance are next. 1 of our GBPUSD trades was stopped out, today's issued GBPCAD short 15 minutes ahead of the BoC decision hit its final target for 170 pips, while the remaining  AUDNZD short further nears its final target.

The market was stubbornly pricing a 25% chance of a BOC cut ahead of the decision and USD/CAD hit a session high of 1.2542 just before the data but it was a quick fall afterwards. The BOC held rates at 0.75% and said inflation risks are now 'more balanced', which is a sign that cuts aren't coming. The pair fell as much as 130 pips before a minor bounce late.

Considerable real money that has fled Canada in the expectation of more rate cuts but with oil continuing to show resilience – including a $1 rally today despite an enormous build in EIA supply data – the window for a run to 1.30 has been closed, at least temporarily. The focus now is on the recent series of lows, which extend down to 1.2350.

One spot where there are no recent lows is EUR/USD. The pair fell through 1.1100 to an 11-year low on Wednesday, leaving very little support aside from the psychological 1.10. There have been signs of better growth in the Eurozone but the wave of QE still hasn't hit and that's the dominant factor.

At the same time, the US dollar was broadly stronger on the day. ADP employment was close to expectations but a solid revision to the previous month spared some dollar buying. In addition, ISM non-manufacturing data at 56.9 was slightly stronger than 56.5 expected. The employment component was also strong.

Later, the Beige Book was cautious and said wage pressures were only moderate but that couldn't stop the dollar. Cable was also caught in the crosshairs as it fell to 1.5263 from 1.5340 in US trading.

Looking ahead, the focus shifts to the Australian dollar with two important releases at 0030 GMT. January retail sales are expected up 0.4% and the trade deficit is expected at A$925m. The problem for Australian dollar bulls right now is that they can't seem to get a foothold. The RBA didn't spark a lasting bounce and neither did a squeeze higher on Wednesday.