USD/CAD - Bank Rate Up to 1%

The Bank of Canada raised its benchmark lending rate by a quarter point yesterday to 1.0%, due to a faster growth pace. After the announcement, BoC cited many reasons to remain cautious on future moves higher; raising rates will have an impact on indebted households, a strengthening Canadian dollar, excess capacity, subdued wage growth against price pressures, and finally geopolitical risks. The 1% benchmark level is a psychological level for the BoC because this was the interest rate level before the global oil glut. During the oil crisis, the central bank slashed rate twice back in 2015 to 0.5%.

The next significant event risk for the Canadian dollar will be its employment figures and the level of unemployment tomorrow. The U.S. dollar has been sliding lower against its G7 counterparts as fundamentals in these countries continue to be elevated due to lower yield environments. Global central bankers are addressing the issues of lower interest rates and quantitative easing, and therefore the greenback is in less demand. Today, investors will consider Initial and Continuing Jobless Claims. Initial claims rose 62,000 to 298,000, another number indicating a slump in jobs growth while continuing claims fell back to 1.940 million vs. previous and estimates of 1.945 million. At 10 a.m., investors will ponder Crude Oil Inventories followed by an 11:15 a.m. speech where the Federal Reserve's Esther Mester speaks on economic outlook and monetary policy.

Euro-zone gross domestic product is up 0.6% in Q2 which is largely in line with forecasts. The focus is now on the European Central Bank press conference this morning where ECB President Mario Draghi held its target interest rate unchanged at 0% while also leaving the current ECB stimulus program unchanged. The market will be looking into the statements to gauge when the central bank reduces its asset-purchasing program going forward.

The pound sterling- U.S.-dollar pairing is trading higher this morning. Today sees the start of a debate in Parliament of the governments European Union (Withdrawal) Bill which aims to revert all EU law effective in the U.K. since 1972 back under national control. The government sees the repealing all of all pieces of legislation since the European Communities Act 1972 as an essential move to ensure U.K. trade negotiations post-Brexit can proceed unhindered. Although Labour MPs agree with the move in principle, they want to ensure the change doesn’t grant government ministers too much power, so investors are urged to expect amendments to be tabled by opposition MPs.

Australian Retail Sales and Trade Balance data released last night, both missing the target. Retail Sales came in flat, missing the goal of a 0.2% m/m increase. Trade Balance figures showed a surplus of 460 million Australian dollars for July, about half the amount expected. Despite this, the Australian-U.S. dollar pairing continues to trade higher. Tonight sees Reserve Bank of Australia Assistant Governor Guy Debelle speaking in Sydney ahead of another speech in Sydney tomorrow by RBA head Philip Lowe.

Oil (WTI): $48.90 U.S. per barrel

Gold: $1,340.09 U.S. per ounce

Silver: $17.94 U.S. per ounce

Copper: $314.30 U.S. per tonne

Dollar Index: 91.47


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