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Asia Pacific Market Open – Canadian Dollar, BoC, Risk Aversion, Australian Dollar, Japanese Yen

  • Canadian Dollar plunged across the board on less hawkish BoC monetary policy announcement
  • Risk aversion still engulfed financial markets, US ones were closed. USD edged cautiously higher
  • Dow futures pointing lower, Asia stocks at risk. Japanese Yen could gain as AUD extends selloff

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With US markets closed for a national day of mourning for former President George H.W. Bush, intense FX volatility could be found externally and from their northern neighbors. The Canadian Dollar plunged across the board, weakened by a relatively less hawkish BoC monetary policy announcement. The probability of a hike in January next year dropped all the way to 26.4% from 66% at the end of last week.

In short, the central bank expects CPI to ease in the coming months, adding that there could be more room for non-inflationary growth. However, they are still committed to raising rates ‘into a neutral range’ and that the future policy stance depends on oil, investment and capacity. Speaking of, crude oil prices swung as OPEC+ members recommended production cuts, but an agreement was not made on the size.

The pro-risk Australian Dollar accelerated its downside momentum as anticipated following a lackluster local third quarter GDP report. Reports that China swung into action to implement trade reforms with the US to avoid tariffs during the 90-day ceasefire ultimately failed to cool risk aversion. Asian and European benchmark stock indexes finished the day lower. The US Dollar ended cautiously higher, benefiting from its safe haven status.

As we head into Thursday’s Asia Pacific trading session, Dow Futures are pointing lower following the selloff in non-US stocks Wednesday. Fears of global growth slowing down and early signs of an inversion in the US yield curve seem to be weighing on sentiment. With that in mind, Asia/Pacific equities may trade lower, boosting the anti-risk Japanese Yen.

Meanwhile the Aussie Dollar awaits trade balance and retail sales data. With yesterday’s disappointing GDP report, local economic news flow has been tending to underperform relative to economists’ expectations as of late. This opens the door to a downside surprise here, further pushing out 2019 RBA rate hike bets. Overnight index swaps are pricing in a 50% chance of one in December of next year.

US Trading Session

Risk Aversion Lingers, Asia Stocks and Australian Dollar at Risk

Asia Pacific Trading Session

Risk Aversion Lingers, Asia Stocks and Australian Dollar at Risk

** All times listed in GMT. See the full economic calendar here

Fundamental Forecast

CAD Bracing for Volatility: BoC Hold, Jobs Report, OPEC Oil Cuts?

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter