We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Mixed
Wall Street
Bullish
Gold
Bearish
GBP/USD
Bullish
USD/JPY
Bullish
More View more
Real Time News
  • Indices Update: As of 07:00, these are your best and worst performers based on the London trading schedule: US 500: 0.71% Wall Street: 0.66% FTSE 100: 0.54% Germany 30: 0.14% France 40: 0.05% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/QW4TmgzMvC
  • 🇫🇷 Consumer Confidence Actual: 93 Expected: 92 Previous: 95 https://www.dailyfx.com/economic-calendar#2020-05-27
  • 🇫🇷 Business Confidence Actual: 70 Expected: 85 Previous: 68 https://www.dailyfx.com/economic-calendar#2020-05-27
  • USD/MXN remains caught in a choppy range, which generally has traders looking for a directional move frustrated. Get your $USDMXN technical analysis form @PaulRobinsonFX here: https://t.co/gCXqAEGVix https://t.co/fVb44SoBzx
  • Heads Up:🇫🇷 Consumer Confidence due at 06:45 GMT (15min) Actual: 93 Expected: 92 Previous: 95 https://www.dailyfx.com/economic-calendar#2020-05-27
  • Heads Up:🇫🇷 Business Confidence due at 06:45 GMT (15min) Actual: 70 Expected: 85 Previous: 68 https://www.dailyfx.com/economic-calendar#2020-05-27
  • 🇳🇴 Unemployment Rate Actual: 3.6% Expected: 4% Previous: 3.5% https://www.dailyfx.com/economic-calendar#2020-05-27
  • Heads Up:🇳🇴 Unemployment Rate due at 06:00 GMT (15min) Expected: 4% Previous: 3.5% https://www.dailyfx.com/economic-calendar#2020-05-27
  • EU Foreign Affairs Minister Josep Borrell: EU to weigh 'robust' message to China over Hong Kong, China wants to influence global public opinion -BBG
  • Japan total bond issuance is said to rise above 200 trillion #Yen -BBG
USD/CAD Awaits Neutral BOC Today; ECB Has High Burden of Proof

USD/CAD Awaits Neutral BOC Today; ECB Has High Burden of Proof

2016-12-07 12:43:00
Christopher Vecchio, CFA, Senior Strategist
Share:

Talking Points:

- Bank of Canada meets today at 14:00 GMT. While less dovish in recent weeks, the BOC will probably be outright neutral today given recent growth data and the jump in energy prices.

- The European Central Bank has laid out significant expectations for tomorrow's policy meeting, and as a result, there is a high burden of proof in order to see the Euro weaken beyond what's already priced-in.

- See the DailyFX Economic Calendar for Wednesday, December 7.

There are two central bank meetings that will take place over the next 24-hours (give or take a few minutes), but they couldn't be occurring under more different circumstances. The Bank of Canada's rate decision and its resulting impact on the Canadian Dollar will very likely play second fiddle to the European Central Bank's policy meeting and press conference and the volatility arising in the Euro.

The BOC is meeting today under idealistic conditions, all things considered. Canada had a rough start to the year on the growth side, particularly as energy prices slumped worldwide. The BOC's decision to drop rates down to 0.50%, where they are expected to remain today, was in large part due to these factors.

Yet after having only a slightly dovish tone at their last policy meeting, and in the interim having seen Q3'16 Canadian GDP beat expectations and energy prices rally sharply in the wake of the OPEC deal, the BOC will very likely be quite content with sitting on its hands and letting nature take its course. In turn, it's difficult to see how such a contented group of policymakers could stir much action in the Canadian Dollar today.

The ECB, on the other hand, is a different animal. Having riled up market expectations significantly over the past few weeks, there is a high burden of proof to meet in order for the ECB to keep the Euro pinned down. Many of the changes to the ECB's program tomorrow had been signalled ahead of time, such as an extension to the QE program, but perhaps also technical changes to the deposit floor threshold or capital key constraints. Add in concerns about Italian banks after the referendum this week, and it seems that the ECB simply has too tall of a task in front of itself to convince markets everything is 'under control' without bringing out another 'bazooka.' A Euro rally tomorrow may very well be in the cards, even if the ECB extends the QE program to September 2017; it's already priced-in. Markets are continuously discounting the future, after all.

See the above video for a technical review of the DXY Index, EUR/USD, GBP/USD, AUD/USD, USD/JPY, USD/CAD, and GBP/JPY.

Read more: December Forex Seasonality Sees US Dollar Weakness into End of Year

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher's e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.