USD/CAD - Bank Rate Announcement on Way

Trade Balance data for Canada will be overshadowed by the Bank of Canada rate announcement today. The argument is whether the BoC will raise interest rate today or wait until the October's Monetary Policy Report and press conference, which will allow for more data readings. Yes, the Canadian economy is growing at a quicker pace than even the central bank has predicted, on the back of consumer spending and construction mainly in home restorations. Lest we forget, the Bank of Canada’s main reason to raise rate is based on inflationary pressure and there are no real data concerns on inflation at this time. Governor Stephen Poloz has laid the groundwork to raise rates without a quarterly MPR and press conference, which provides more guidance and keep market less volatile.

It is well noted that the BoC since it initiated the current format in 2002 that it has adjusted interest rates 16 out of the 37 times in just a statement with no MPR or press conference. The market has factored in a probability of a hike today to 57%. The announcement is due for release at 10 a.m. ET.

The U.S. dollar is data dependent today with Trade Balance, Markit Composite, and Services Purchasing Managers Index figures out this morning. Then, at 10 a.m. Institute for Supply Management Services, and Non-Manufacturing Composites for August are released. Today's fundamentals will be followed up by the U.S. Federal Reserve Beige Book at 2 p.m. Yesterday’s selloff in equities was equated to risk off as tensions increase in the Korean Peninsula and futures are pointing again for a softer open.

Euro-zone PMIs were revised lower for August and retail sales also fell in July. But with Federal Reserve member Lyle Brainard’s comments in the afternoon from the U.S., investors saw the euro move against its U.S. counterpart above $1.19. The highlight of the week will be tomorrow’s European Central Bank interest rate announcement and statement afterward. Expect the theme to be around dovish tapering. ECB President Mario Draghi is renowned for being very cautious, so it is thought that he will reduce monthly purchases by around €20 – 30 billion a month from January.

The main news out of the U.K. was in the form of U.K. Services PMI which grew at its slowest level in 11 months. The usual reasons could be cited; low levels of confidence and high levels of uncertainty. With the strong manufacturing and weak construction data, the U.K. economy is now set on course to expand around 0.3% for the quarter. Despite this weak data, though, the pound had an active day, picking up against both the US dollar. There is no data from the UK today but watch out for ISM Non – Manufacturing data from the U.S.

Yesterday, the Reserve Bank of Australia kept interest rates on hold at 1.5% for the 13th consecutive month. RBA Governor Philip Lowe stated that cutting rates would add excess risk to the household balance sheet. In the official statement, the central bank said that the rising Australian dollar was weighing on output and employment.

Oil (WTI): $49.21 U.S. per barrel

Gold: $1,339.62 U.S. per ounce

Silver: $17.95 U.S. per ounce

Copper: $313.80 U.S. per tonne

Dollar Index: 92.22

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