- BoC rate hike of 0.50% priced in
- Eurozone data is mixed, PMI higher,
- US dollar posts modest gains at open
USDCAD Snapshot: open 1.2639-43, overnight range 1.2638-1.2671, close 1.2638, WTI open $116.70, Gold open $1,831.48
The Canadian dollar is trading at its overnight session low, ahead of today’s Bank of Canada monetary policy announcement.
Canada grew slower than forecast in March, with GDP rising just 3.1% y/y compared to expectations of a 5.4% rise, and well below the 6.6% y/y seen in February. On a monthly basis, GDP rose 0.7%, above consensus (0.5%) but below February’s 0.9% reading. Statistics Canada warned that the April data is tracking at 0.2% m/m.
ING Bank analysts suggest that a 0.75% rate hike cannot be ruled out due to high commodity prices, elevated inflation, and a strong economy. The odds for such a move are slim to almost none. Today’s monetary policy meet does not include a press conference and Governor Tiff Macklem would not make such a big, move without being front and center.
Any reaction to the expected BoC rate hike may be short-lived as evidenced by price action in the antipodean currencies after the RBA and RBNZ raised rates. Traders are more focussed on US rates and the American inflation outlook.
The major Asian equity indexes closed with small gains, except for those in China. European bourses are mixed. The German Dax is up 0.24% while the UK FTSE 100 is down 0.32%. DJIA futures are posting a modest gain while S&P 500 futures are flat. The 10-year Treasury yield climbed to 2.86% from of 2.81% yesterday.
EURUSD is trading sideways in a 1.0706-1.0739 range. Prices are supported by hawkish comments from Austria’s central bank boss and ECB policymaker Robert Holzmann saying that a 0.50% rate hike would send a clear signal that the ECB was serious about fighting inflation.
GBPUSD traders were undecided. The currency pair drifted in a 1.2573-1.2615 band and is sitting at 1.2585 in NY. Analysts are lathered after Manufacturing PMI fell to 54.6 in May from 55.8 in April, a 16-month low.
AUDUSD eked out a small gain, rising from 0.7160 to 0.7196, with prices underpinned by better than expected growth. GDP rose 3.3% y/y in Q1 compared to expectations for a 3.0% increase.
There are plenty of US economic reports today, including ISM manufacturing, PMI Construction Spending, JOLTS Job openings, and the weekly jobless claims data.
