USD/CAD - Loonie Flat on Eve of Rate Decision

Safe havens remain well bid this morning as ongoing tensions over North Korea’s recent nuclear test continue to dominate the news. On Sunday, a test believed to have been at least three times the power of the Hiroshima bomb took place in the north of the country, rattling markets around the world. The U.S. is preparing to present a new U.N. resolution with tougher sanctions as the standoff with Kim Jong-un’s secretive state continues. The U.S. has also agreed to sell South Korea billions of dollars in new weaponry while China has led the calls for negotiations as a way to stop the situation deteriorating. In this environment, the U.S. dollar is trading off its low but remains range bound.

Focus now turns to Federal Open Market Committee speaker Neel Kashkari and Robert Kaplan later on today The Canadian is relatively flat today as we go into the Bank of Canada rate decision tomorrow. The recent Gross Domestic Product report has raised the probability of a rate hike this week, with markets pricing in a 55% chance of a 25-basis-point hike. Oil is firmer today but the main focus will remain on the BoC rate decision.

The euro has dropped this morning in early trade possibly signalling that traders are coming round to idea that European Central Bank President Mario Draghi may make no announcement with regards to a tapering of its Quantitative Easing programme. As mentioned yesterday, a reduction in its asset purchasing was all but assured a few weeks ago, however, concerns over the euro's rise mean this decision may be delayed until the winter. There is little data from the euro-zone today and investors are urged to expect continued positioning ahead of Thursday’s press conference.

Brexit Secretary David Davis is expected to update MPs later today on how negotiations with the European Union are going and there have been reports that towards the end of the month Prime Minister Theresa May will give a speech in an effort to update the world on the U.K.s position over its terms of secession in an effort to try and get trade talks going at the EU leaders get-together scheduled for mid-October. After the usual quiet of August, the September schedule is starting to look very busy. Yesterday saw a lousy Construction Purchasing Managers Index from the U.K. with 51.1 being its worst print since September last year. Data starts proper today for the U.K. with the closely followed Services PMI expected to fall from 53.8 to 53.3. From the States, there is a slew Fed-speak, with FOMC members Lyle Brainard, Kashkari and Kaplan all due to give talks.

The Reserve Bank of Australia left the cash rate unchanged at 1.5% overnight as was widely expected. The accompanying statement saw the currency drop off a touch as the hawkish minutes from last month’s meeting failed to spread onto this month’s statement, despite some upbeat data of late (Retail Sales and quarterly Private Capital Expenditure beat estimates in August). It’s a busy week for the Australian dollar with Q2 GDP due tonight and Retail Sales tomorrow.

Oil (WTI): $48.30 U.S. per barrel

Gold: $1,331.33 U.S. per ounce

Silver: $17.89 U.S. per ounce

Copper: $315.65 U.S. tonne

Dollar Index: 92.47

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