Intraday Market Thoughts

Loonie Lurches Higher, BOE Next

by Adam Button
May 9, 2018 23:08

After a slow start to the week in the way of data, get ready for some Thursday action with BoE rate decision, minutes, inflation report and Carney speech. And don't forget US CPI. Crude jumped more than 3% to fresh highs since 2014 in the aftermath of the US decision to leave the Iran nuclear deal. The loonie took advantage to lead G10FX while the yen lagged. The BOE decision is next and a new GBP trade will be issued in the next 12 hours in addition to the index trade issued earlier today.  And don't forget Ashraf's Thursday London Seminar and Ashraf's Saturday Old Trafford event in Manchester.

تفسير الصفقات الجديدة (فيديو للمشتركين)

It was appropriate that CAD and JPY were on the opposite side of the equation Wednesday as they're on opposite sides of the commodity trade. CAD/JPY climbed more than 100 pips and USD/CAD dropped by the same amount in win for the loonie that keyed off Tuesday's rejection of 1.30.

The loonie hasn't reflected the recent climb in oil prices because Canadian producers were struggling with bottlenecks that sparked a wide spread between Canadian oil and WTI. That's now narrowed to $15 from $30.

There are also signs of a pickup in investment with several Canadian firms making deals to sell assets this week in a sign that money is ready to go to work again in energy. CAD event risk remains high with the employment report due on Friday.

The USD side of the trade remains in flux as well. The big dollar is approaching 110.00 against the yen, with the 200-dma at 110.17 as well. On Thursday, the CPI report is a major risk but be sure to watch for quirks in the data as cell phone services inflation rolls off. Recent quirks in hotel prices, apparel and healthcare costs could also skew the numbers.

Early in Asia-Pacific trading the RBNZ held rates as expected but new Governor Adrian Orr hurt the kiwi with a statement that warned about weak inflation and keeping rates low for a considerable time. NZD/USD fell to 0.6940 from 0.6980 in the immediate aftermath.

The next central bank in focus is the BOE. The market is pricing in a 13% chance of a cut, down from 96% three weeks ago after a string of poor economic data. The focus will be on signals about August, where a hike remains a 50/50 proposition. If Carney strikes a hawkish tone, there is room for a sizeable GBP rebound.

Act Exp Prev GMT
RBNZ Rate Decision
1.75% 1.75% 1.75% May 09 21:00
RBNZ Gov Orr Speaks
May 10 1:10

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