- BoC to leave rates unchanged
- Fed Chair Jerome Powell testifies to Congress today.
- US dollar drifts down on mild improvement in risk sentiment.
USDCAD: open 1.3586-90, overnight range 1.3573-1.3600, close 1.3593, WTI $78.85, Gold, $2125.76
The Canadian dollar barely budged overnight, then drifted through the session floor in early NY trading ahead of the Bank of Canada monetary policy meeting.
The BoC is universally expected to leave the overnight unchanged at 5.0% while they await further evidence that inflation is falling sustainably to its 2.0% target and that the labour market is rebalancing. BoC officials will follow the lead of other central banks and warn that there are still plenty of upside risks to inflation, despite the most recent domestic CPI data that showed inflation dropping into the BoC’s 1-3% target zone.
In addition, the BoC may be reluctant to lower interest rates due to pent-up demand for housing. The Trudeau government welcomed 1 million legal and illegal immigrants last year which exacerbated the existing housing shortage. That shortage still exists and the law of supply and demand is at work, driving up housing prices.
There are plenty of risk events today including Fed Chair Powell’s testimony and the UK budget. In addition, the US ADP employment change data for February (forecast 150,000) and the JOLTS Job Openings survey (forecast 8.9m vs December 9.026 m) are due.
EURUSD climbed to 1.0880 from 1.0841, partly due to better than expected German exports (actual 6.3% m/m vs. -4.5% in December).
However, soft Eurozone Retail Sales (-1% y/y) and caution ahead of tomorrow's ECB monetary policy meeting are limiting gains.
GBPUSD is enjoying a pre-budget boost and rose from 1.2690 to 1.2732 in early NY with an assist from better than expected Construction PMI (actual 49.7 vs. forecast 49, previous 48).
USDJPY took a turn for the worse and dropped from 150.09 to 149.31 following a report that the Bank of Japan would end negative rates at the March 19 meeting.
AUDUSD traded firmer in a 0.6492-0.6528 range due to improved risk sentiment. Australia's Q4 GDP was weaker than expected (actual 0.2% q/q vs. forecast 0.3%) but an upwardly revised Q3 GDP (0.3% from 0.2%) took the sting out of the news.
NZDUSD rose from 0.6069 to 0.6105 in NY, supported by improved risk sentiment and comments by RBNZ official Chief Economist Paul Conway suggesting rates need to remain restrictive for a sustained period.
