- BoJ surprises markets with YCC tweak
- Canada Retail Sales expected to have rebounded in October
- US dollar on defensive after overnight turmoil
USDCAD snapshot 1.3616-20, overnight range 1.3607-1.3702, close 1.3651, close 1.3697, WTI $75.86, Gold $1806.59
The Canadian dollar had a wild ride overnight and it was not alone.
A surprise move by the Bank of Japan to widen its yield curve control (YCC) band from +/- 25 bps to +/- 50 bps sparked a tsunami of demand for Japanese yen and the Canadian dollar was caught in the cross-fire.
Bank of Japan policymakers including Governor Haruhiko Kuroda have spend the last six months telling whoever would listen that there was no need to change Japan’s ultra-low monetary policy. They claimed Japan’s economy was “different” from the other major G-10 economies.
Traders were taken by surprise with the rise in the yield curve control which means long term Japanese government bonds can rise. They did. The yield on the 10-year JGP jumped 21 bps to 0.46%.
It wasn’t just JGB’s that rose. The US 10-year Treasury yield surged to 3.71% from 3.583% before slipping to 3.66% in early NY trading.
The BoJ actions trashed global equity markets as well. Asian equity indexes closed with steep losses. Australia’s ASX 200 fell 1.54% while China’s Shanghai Shenzhen CSI 300 index dropped 1.65%. European bourses followed suit by all are managing to recoup most of the initial losses. The German DAX index had dropped 1.02% at its lowest point but is only down 0.32%.
S&P 500 futures fell to 3776.26 from 3814.21 at the NY close but rallied and are unchanged in NY.
The Canadian dollar managed to recoup all its post-BoJ announcement losses and opened in NY with a 0.24% gain. The bounce in West Texas Intermediate (WTI) oil prices to $76.28/barrel helped sentiment.
Canada’s October Retail Sales report is due today. Statistics Canada is projecting that the advance estimate of retail sales, suggests sales increased 1.5% in October.
The news is not expected to have much impact on Canadian dollar trading as the market’s focus is on the outlook for US interest rates.
FX markets churned due to the BoJ action.
EURUSD rose, fell, and rose again in a 1.0580-1.0652 range and despite the volatility opened in NY with a minor 0.9% gain from where it opened on Monday.
GBPUSD traded erratically in a 1.2087-1.2223 range and is at 1.2143 in NY.
Today’s US data, November Housing Starts and Building Permits data, will have little impact on FX.
