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Asia AM Digest: Canadian Dollar Soars as BOC Rate Hike Bets Swell

Asia AM Digest: Canadian Dollar Soars as BOC Rate Hike Bets Swell

2018-01-08 00:00:00
DailyFX Research,
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Economic data defined price action Friday, with the Euro plunging after disappointing CPI data put the pace of core inflation at 0.9 percent, undershooting expectations calling for a pickup to 1 percent. Traders may have read the miss as undermining the case for a speedier tapering of ECB asset purchases.

Meanwhile, the Canadian Dollar soared after impressively strong labor market statistics put the jobless rate at the lowest in over 40 years. That pushed the priced-in probability of a BOC rate hike later this month to 82.5 percent, up from just 45.2 percent a week before.

The US Dollar produced a mixed response to its own set of employment figures. The headline payrolls print fell short of expectations but the unemployment rate held at the very low 4.1 percent and wage inflation accelerated, albeit in line with economists’ prognostications.

DailyFX Economic Calendar: Asia Pacific (all times in GMT)

Asia AM Digest: Canadian Dollar Soars as BOC Rate Hike Bets Swell

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Asia AM Digest: Canadian Dollar Soars as BOC Rate Hike Bets Swell

IG Client Sentiment Index Chart of the Day: EUR/GBP

Asia AM Digest: Canadian Dollar Soars as BOC Rate Hike Bets Swell

CLICK HERE to learn more about the IG Client Sentiment Index

Retail trader data shows 42.7% of traders are net-long EUR/GBP, with the ratio of traders short to long at 1.34 to 1. In fact, traders have remained net-short since Dec 19 when EUR/GBP traded near 0.88167; price has moved 0.7% higher since then. The number of traders net-long is 6.5% higher than yesterday and 0.9% higher from last week, while the number of traders net-short is 12.3% lower than yesterday and 2.9% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/GBP prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/GBP price trend may soon reverse lower despite the fact traders remain net-short.

Five Things Traders are Reading

  1. Weekly Forecast: Carry and Euro Rise to Start the Year as Dollar Struggles by DailyFX Research Team
  2. Ripple (XRP/USD) Tumbles on Questionable Bank Adoption by Christopher Vecchio, CFA, Sr. Currency Strategist
  3. U.S. Dollar Checks, Bounces From Support on NFP Disappointment by James Stanley, Currency Strategist
  4. Crude Oil Price Falls From 3-Year High On Swelling US Supplies by Tyler Yell, CMT
  5. EUR/USD Weekly Technical Analysis: Euro Looking to Clear 2017 Highby Paul Robinson, Market Analyst

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