Canadian dollar spikes, as interest rate is raised to 0.75%, DJIA reaches record high after Janet Yellen’s dovish tone
The biggest currency move on Thursday concerned the Loonie; the Canadian dollar. In a widely anticipated and heavily forecast move, the BOC (the central bank of Canada), raised rates by 0.25% to 0.75%, causing USD/CAD to collapse steadily through the New York session, smashing through S3 to end the day at circa 1.2698, down circa 1.5% on the day. The Loonie made gains of circa one percent versus the majority of its peers. WTI oil rising also helped add momentum to the commodity currency’s advance. Other Canadian data released on Thursday, indicated that HPI is running high at 14.2% YoY, with an advance of 2.6% in the month of June. Perhaps the BOC committee members had one eye on reducing house price inflation, when reaching their rate rise decision.
From the USA the chair of The Fed, Janet Yellen, gave no indication that the next interest rate rise was imminent as she struck an overall dovish tone during her testimony to the house panel, this came after her testimony was earlier released to Congress. Citing that inflation and certain softness in the jobs data, provided the Fed with no early incentive to raise rates before the end of the year, which had always been pencilled in as the third rate rise the Fed had committed to at the start of the year. Mortgage applications in the USA fell -7.4% last week, missing the expectation of a rise above the 1.4% registered for the previous week. Gasoline and crude inventories for the USA came in ahead of the predictions, causing WTI oil to rise by circa 1% to circa $45.65 per barrel. The DJIA closed up 0.57%, SPX up 0.73% and the tech heavy NASDAQ closed up 1.10%. USD/JPY fell through S2 and by circa 0.6%, to 113.24. Gold breached R2 shortly after New York opened, to later retrace back to R2, closing up circa 0.5% on the day, at $1220 per ounce.
European news mainly concerned the UK’s latest: employment, unemployment and earnings data. Unemployment came in at a 42 year low at 4.5%, the U.K. added 175k jobs in the latest quarter, and earnings came in at 1.8% growth annually. The UK’s FTSE rallied by 1.19% as a consequence, whilst sterling also rose versus the majority of its peers, GPB/USD rose by circa 0.3% to 1.2828, EUR/GBP fell to 0.8862. Eurozone industrial production has risen 4.0% YoY and by 1.3% in May. Eurozone indices enjoyed a positive day, STOXX 50 closing the day up 1.46%, DAX up 1.52% and France’s CAC up 1.59%. The euro slipped versus the majority of its peers during Thursday’s sessions, EUR/JPY crashing through S3 to end the day at circa 129.29, EUR/USD ending the day down approx 0.5% at 1.1415, EUR/CHF posted a similar daily loss.
Economic calendar events for July 13th, all times quoted are London GMT time
06:00, currency impacted EUR. German Consumer Price Index (YoY) (JUN F). German key inflation is forecast to remain unchanged at 1.6%.
08:30, currency impacted. GBP Bank of England Credit Conditions & Bank Liabilities Surveys. With the politics of Brexit becoming more intense and the UK’s economy stalling, this report will be eagerly watched.
12:30, currency impacted CAD. New Housing Price Index (YoY) (MAY). The prediction is for 3.5%, a fall from 3.9% in April.
12:30, currency impacted USD. Initial Jobless Claims (JUL 08). A forecast for 245k claims, versus the 248k recorded, during the previous week is expected.
14:00, currency impacted USD. Fed Chair Yellen Testifies Before Senate Banking Panel. Mrs Yellen is due to finalise her appearances this week, with a date before the senate banking panel.
18:00, currency impacted USD. Monthly Budget Statement (JUN). The deficit is forecast to come in worse than the -$35.0b recorded in May.