The Canadian dollar enjoyed a somewhat lively overnight session but, despite the volatility, opened nearly unchanged from Tuesday’s closing level.
The currency pair is being bounced about by constantly shifting U.S. dollar sentiment, with a bit of caution ahead of today’s Bank of Canada monetary policy meeting added to the mix. The BoC meeting is a statement only affair. There is not a press conference, but official comments are expected from Deputy Governor Lawrence Schembri tomorrow.
The statement could spark a bit of a Canadian dollar rally if it alludes to the onset of tapering. Analysts have noted that the domestic data 9.4% jump in Q4 Gross Domestic Product suggest that economy is far stronger than the BoC expected and warrants an adjustment of stale guidance.
They also believe that the pending $1.9 trillion U.S. stimulus spending bill benefits the domestic economy.
There are some concerns that the BoC’s claim that interest rates will not rise until at least 2023 is not a realistic view in light of the recent economic data.
Nevertheless, it is unlikely those fears will be addressed in today’s statement.
The Canadian dollar continues to be underpinned by firm oil prices. Last week, the Organization of the Petroleum Exporting Countries and Russia agreed to extend existing production cuts until May, while Saudi Arabia left its voluntary one million barrel/day cut intact. Analysts believe the vaccine-fueled global economic recovery will drive prices higher.
EUR/USD traded down from $1.1900 at the close to $1.1870 in Asia then climbed to $1.1904 in Europe, although the bias remains negative. Prices continue to be weighed down by widening interest rate differentials favouring the U.S. and expectations that Eurozone growth will lag America's.
Traders are also waiting for the results of the European Central Bank monetary policy meeting tomorrow.
GBP/USD opened unchanged from yesterday after trading in a $1.3847-$1.3913 range overnight. The currency pair continues to benefit from their vaccine program, which suggests a robust post-pandemic economic rebound.
USD/JPY rallied to 108.91 before retreating to 108.50, closely tracking U.S. 10-year Treasury yield price action. The technicals are bullish above 108.000 looking for a test of 110.00
AUD/USD chopped around in a $0.7670-$0.7718 range, weighed down by U.S. dollar demand and iron-ore price weakness. Reserve Bank of Australia Governor Philip Lowe re-affirmed that the OCR rate will remain at 0.1%. He also said that the currency was not overvalued.
U.S. inflation data is due. February Consumer Price Index is expected to rise 1.7% y/y compared to 1,4% in January. CPI, ex-food, and energy is forecast to be unchanged at 1.4%.
