Talking Points:
Comments from BOC’s Poloz Compound Canadian Dollar Selling Pressure
Yen Sold on Waning Haven Demand as Nikkei Rallies Most in Three Weeks
FOMC Minutes in Focus to Help Guide Future QE “Tapering” Dynamics
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The Canadian Dollar underperformed in overnight trade, falling as much as BOC Governor Poloz said he is not under pressure to raise interest rates in an interview with CBC. The move followed on from yesterday’s dramatic Loonie selloff in the wake of a disappointing round of economic data. The trade deficit unexpectedly widened to the largest in three months. Meanwhile, the Ivey PMI gauge revealed business activity contracted for the first time since July in December. Economists were forecasting a pick-up ahead of the release. The Japanese Yen slumped as the Nikkei 225 stock index soared 1.94 percent, yielding the largest daily gain in three weeks and denting demand for the safe-haven currency.
A relatively tame offering of second-tier economic data in European hours is likely to see traders looking ahead to the release of minutes from December’s FOMC meeting later in the day. The fateful sit-down marked the beginning of the much-anticipated process of “tapering” the Federal Reserve’s QE3 program, scaling down monthly asset purchases by a cumulative $10 billion.
While the new Fed policy status quo is widely known at this point, traders will be keen to read the minutes nonetheless to try to decipher precisely what variables proved pivotal in pushing the rate-setting committee into action. This may establish a framework for interpreting US economic news flow, helping investors gauge the probability of acceleration or deceleration in the stimulus reduction process.
On balance, a relatively hawkish tone stands to boost the US Dollar against policy-sensitive currencies, notably the Australian Dollar and the Yen. Needless to say, a softer lean that paints the decision to taper as having been particularly narrow may trigger the opposite dynamic.
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Asia Session:
GMT
CCY
EVENT
ACT
EXP
PREV
22:30
AUD
AiG Performance of Construction Index (DEC)
50.8
–
55.2
0:01
GBP
BRC Shop Price Index (YoY) (DEC)
-0.8%
–
-0.3%
0:30
AUD
Job Vacancies (NOV)
-1.7%
–
3.0%
5:30
AUD
Foreign Reserves (A$) (DEC)
A$59.5B
–
A$59.9B
Euro Session:
GMT
CCY
EVENT
EXP/ACT
PREV
IMPACT
7:00
EUR
German Trade Balance (€) (NOV)
18.1B (A)
17.9B
Low
7:00
EUR
German Current Account (€) (NOV)
21.6B (A)
18.8B
Low
7:00
EUR
German Exports s.a. (MoM) (NOV)
0.3% (A)
0.3%
Low
7:00
EUR
German Imports s.a. (MoM) (NOV)
-1.1% (A)
3.0%
Low
8:00
GBP
Halifax House Prices s.a. (MoM) (DEC)
-0.6% (A)
0.9%
Low
8:00
GBP
Halifax House Price (3M/Y) (DEC)
7.5% (A)
7.7%
Medium
9:00
EUR
Italian Unemployment Rate (NOV P)
12.7% (A)
12.5%
Medium
10:00
EUR
Euro-Zone Retail Sales (MoM) (NOV)
0.1%
-0.2%
Medium
10:00
EUR
Euro-Zone Retail Sales (YoY) (NOV)
0.3%
-0.1%
Medium
10:00
EUR
Euro-Zone Unemployment Rate (NOV)
12.1%
12.1%
Medium
11:00
EUR
German Factory Orders s.a. (MoM) (NOV)
1.5%
-2.1%
Medium
11:00
EUR
German Factory Orders n.s.a. (YoY) (NOV)
6.1%
1.9%
Medium
Critical Levels:
CCY
SUPP 3
SUPP 2
SUPP 1
Pivot Point
RES 1
RES 2
RES 3
EURUSD
1.3505
1.3564
1.359
1.3623
1.3649
1.3682
1.3741
GBPUSD
1.6275
1.6340
1.6371
1.6405
1.6436
1.6470
1.6535
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Source: Daily fx