- Overnight Interest Rate Update 02.09.10 Tue, 09 Feb 2010 05:24 GMT
- RICS Survey Hints UK House Prices May Decline as Supply Swells Tue, 09 Feb 2010 04:41 GMT
- UK Retail Sales Growth Worst in 15 Years in January, says BRC Tue, 09 Feb 2010 02:19 GMT
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- Feb, 09 Pound Rebounds As Risk Appetite Dictates Price Action
- Feb, 08 Euro Re-establishes Risk Correlation on Sovereign Credit Concerns
- Feb, 04 Yen Soars As Risk Trends Dominate Price Direction
- Feb, 02 Pound Losses Slowed As Risk Appetite Rises, BoE Could Set New Course
- Feb, 01 Euro Finds Limited Support From Risk Appetite, As Correlation Weakens
- Jan, 28 USD/JPY Weighed By Lower U.S. Interest Rate Expectations
- Jan, 29 Canadian Dollar Pressured As Crude Falls For Fourth Day
- Jan, 27 New Zealand Dollar Taking Cue From Yield Expectations with Rate Decision Looming
- Jan, 26 Pound Taking Its Cue From Equity Markets As BoE Likely To Remain On Hold
- Jan, 25 Euro Finds Support As Stocks Regain Footing
- Jan, 21 Canadian Dollar Dragged Lower by Falling Oil, Technical Levels Could Slow Losses
- Jan, 20 Pound Remains Supported Despite Prevailing Risk Aversion As Yield Expectations Grow
- Jan, 19 Euro Regains Footing On Positive Equity Markets Which Continue To Dictate Direction
- Jan, 15 USD/JPY Looks To U.S. Interest Rate Expectations For Direction
- Jan, 13 Australian Dollar’s Correlation With Commodities Weakens, As Interest Rates Come Into Focus
- Jan, 12 The Pound Rises on Strong Exports, Will Weak Equity Markets Reverse Gains?
- Jan, 11 Euro at Risk with ECB Rate Decision and Earnings Season Approaching.
- Jan, 07 Pound Looks to Risk Trends for Direction, As BoE Remains On Hold.
- Jan, 04 Euro Follows Stocks Higher, But Will Friday’s NFP Alter Relationship?
- Dec, 23 Canadian Dollar Finding Support on Firming Oil and Yield Expectations
The USD/CAD continues to remain in a tight range as it takes its lead from oil prices which have continue to find resistance at $80 bbl. Concerns over future demand have limited bullish sentiment despite crude finding support from dollar weakness.
USD/CAD
The USD/CAD continues to remain in a tight range as it takes its lead from oil prices which have continue to find resistance at $80 bbl. Concerns over future demand have limited bullish sentiment despite crude finding support from dollar weakness. “Black gold” is explaining 70% of Canadian dollar volatility making it the primary source of price direction. Interest rate expectations have started to grow in importance with its correlation elevating to 33% from 25% a month ago. The central bank has committed to keeping rates on hold until mid-2010 and as the deadline approaches yield expectations will continue to see its influence on price action rise in significance.
BoC Interest Rate Expectations
Interest rate expectations for Canada have tumbled since their peak on10/14 when overnight index swaps were pricing in a 112 bps. A pledge by policy makers to keep rate slow and subdued inflation has seen the yield outlook fall to 60 bps. Today’s’ release of October’s consumer price report showed prices rose for the first time in five months, but at 0.1% is a distance from the central bank’s target of 2.0%. A concern for policy makers could be the rise in the core reading to 1.8% from 1.5%. Governor Carney remains concerned over the Canadian dollar’s recent strength has insisted that they will use a combination of currency intervention, credit and quantitative easing options to influence the loonies’ value.
FOMC Interest Rate Expectations
The impact from Fed Chairman Ben Bernanke dollar supportive comments have passed sending interest rate expectations lower with Fed Funds futures now pricing in a 5.7% chance of a rate hike in January with odds in March sinking to 11.5%. Consumer prices in the U.S. saw the pace of their decline slow to -0.2% from -1.3% but remain far from creating any significant inflation threat which will allow the central bank to remain on hold.
Oil
Oil is up against trendline resistance as it continues to remain in its current channel. The range bound price action is indicative of the uncertainty of future demand as consumers continue to retrench and efforts ramp up to find alternate sources of energy. The latest EIA report showed U.S. crude stocks fell last week which has provide support for oil prices. However, we may see market reluctant to make aggressive bets as the December OPEC meeting brings the possibility of increased supply.
To discuss this report or be added to the email list contact John Rivera, Currency Analyst: jrivera@fxcm.com
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