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In the Zone
- There so many fundamental scenarios at playing at present, the debt ceiling limit was extended between the Democrats and Republicans, but there does seem to be some cracks showing with the GOP and the White House.
In a week that is centring on Hurricane Irma which is turning into a record breaking event, the day was always going to be about Canada – the BOC were overly hawkish at the last meeting, when rates were hiked. There was only a 40% chance of a hike heading into the meeting yesterday, but the BOC decided to hike for a second consecutive meeting by another 25bps. The committee also left the door open for another interest rate hike in 2017 and will take the Fed stance of now watching economic data and financial markets.
CAD traders seemed to be taken by surprise as the pair moved from 1.2400 all the way down to 1.2125 which was a move of 275 pips. The bulk of this move came within the first couple of seconds of the announcement and the subsequent bounce was up to 1.2250 a couple minutes later. The pair seems to be undecided as to what next, my opinion is that the move was largely overdone and so I will be looking to fade the move and look for opportunities to go long.
Other news that would have had a major impact on the greenback was news filtering in that Stanley Fischer, the Vice Chair of the Fed, has resigned and will be leaving in October. This means that the voting members of the Fed now sits at 3 – instead of 7 – and if Yellen is not reappointed in January it means that Trump will be able to shape the Fed towards the bias that he wants.
The EURUSD has been hovering around both the 100 and 200 MA levels at 1.1902 and 1.1920, the bias seems to be towards sellers. The market may drift this morning as we eagerly await for the ECB decision and in particular comments by Draghi – I am wondering if he will use the opportunity to jawbone the pair lower.
There are some potential set ups that I do highlight in the morning video, the trade that I am most looking towards is for a short in the AUDUSD.
Keep an eye out for the afternoon video that tries to tie everything together.
Important Economic Data out today
13:45 EUR Minimum Bid Rate
Effect: Actual higher than expected is good for the EUR
14:30 EUR ECB Press Conference
Effect: More hawkish than expected is good the EUR
14:30 USD Unemployment Claims
Effect: Actual lower than expected is good for the USD
17:00 USD Crude Oil Inventories
Effect: No consistent effect on the USD
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