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.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Wall Street
Bearish
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
USD/JPY
Bullish
More View more
Real Time News
  • 🇫🇷 Industrial Production MoM (MAY) Actual: 19.6 Expected: 15.1% Previous: -20.1% https://www.dailyfx.com/economic-calendar#2020-07-10
  • Heads Up:🇫🇷 Industrial Production MoM (MAY) due at 06:45 GMT (15min) Expected: 15.1% Previous: -20.1% https://www.dailyfx.com/economic-calendar#2020-07-10
  • A macro forex trading guide exploring how to trade the Euro vs the Swedish Krona and Norwegian Krone through the prism of the Core-Perimeter model. Get your market update from @ZabelinDimitri here:https://t.co/n6zwlZJmGO https://t.co/jbUscJ9E0u
  • USD/CAD IG Client Sentiment: Our data shows traders are now net-short USD/CAD for the first time since Jun 26, 2020 when USD/CAD traded near 1.37. A contrarian view of crowd sentiment points to USD/CAD strength. https://www.dailyfx.com/sentiment https://t.co/SJ4cDT3iIe
  • Learn about the ASEAN-China relationship and how to trade ASEAN currencies like the Singapore Dollar, Indonesian Rupiah, Philippine Peso and Malaysian Ringgit using the Core-Perimeter model. Get your market update from @ZabelinDimitri and @ddubrovskyFX : https://t.co/rNJkPpVCdk https://t.co/6qJKFUBFRm
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.99%, while traders in US 500 are at opposite extremes with 72.57%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/cZNGi5LUei
  • Forex Update: As of 04:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.15% 🇨🇦CAD: -0.08% 🇪🇺EUR: -0.12% 🇨🇭CHF: -0.20% 🇳🇿NZD: -0.21% 🇦🇺AUD: -0.30% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/hGwx59H99O
  • Indices Update: As of 04:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.30% France 40: 0.21% FTSE 100: 0.15% US 500: -0.28% Wall Street: -0.29% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/H0zNNKbJbt
  • The Core-Perimeter trading model helps traders understand interactions between global economies, helping to trade the assets embedded in these relationships. Get your market update from @ZabelinDimitri here:https://t.co/dKRAo00lfA https://t.co/619vy6dGeq
  • The US Dollar is pressured as rising coronavirus cases fail to dent 2021 GDP bets. Could the Singapore Dollar, Indonesian Rupiah, Philippine Peso and Malaysian Ringgit rise? Find out from @ddubrovskyFX here:https://t.co/u1qhaIGGoC https://t.co/12AYQD2Y66
Canadian Rate Cut: a Double-Edged Sword?

Canadian Rate Cut: a Double-Edged Sword?

2015-01-22 18:01:00
Walker England, Kara Dailey,
Share:

Talking Points:

  • BOC lowers their interest rate (0.75%) and growth outlook (1.5%)
  • Benefits energy and non-energy exporters, yet increases financial system risks
  • USDCAD hits a 5 year high

On Wednesday the BoC created short term volatility, shocking the markets with a 0.25 bps cut in the overnight rate. The move lower to 0.75% is the first move away from the 1.0% mark held since April of 2009. According to statements made by Central Bank Governor, Stephen Poloz, the deviation was made in response to the uncertainty surrounding oil prices. While the move warrants upside potential, it does not come without financial risk, possibly even harboring an element of contagion.

As a net exporter of oil, Canada becomes the first of the G7 countries to lower their cost of financing as a result of global commodity pricing. The bank sees the rate cut as aiding both energy and non-energy exporters alike. The first group will find relief in their US Dollar denominated products, while the latter should see a rise in demand for their relatively cheaper goods/services. The benefits however do not end with the manufacturing and mining sectors. Within the financial sector banks can both borrow and lend at cheaper rates—an exchange that proves to be a double-edged sword.

While benefiting banking institutions, the lower rates simultaneously leave the financial system vulnerable to overextensions made by consumers. Lower interest may expand the debt to income ratio which currently resides near record highs at 165%. A shift in debt financed purchases can already be seen; car sales reached a record level (1.85 million units) in 2014 and are expected to be sustained in 2015. Furthermore, any additional debt borrowing for homes may add insult to injury in a housing market already thought to be overvalued; the estimates range from 10% (Canada Mortgage and Housing Corporation) to 30% (The Economist).

In addition to lowering their interest rate, the BoC dropped their growth forecast for the first half of 2015 to 1.5% from 2.4%—a common theme globally. Now the question remains, will the reversal from a rate hike bias to a rate cut spread? Possible subjects include the BoE (whose 2 hawks dropped the campaign for rate hikes this month) and the RBA. The later institution will have to decide on February 4th whether their fundamental position, regarding commodity exports and inflation, is similar enough to Canada to facilitate a rate cut.

USD/CAD 1 Month Chart

dailyfx US Dollar Canadian Dollar January 2015

Chart Created by Walker England Using MarketScope2.0

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

DISCLOSURES

News & Analysis at your fingertips.