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    IronFX Daily Commentary | 21/10/2015

    • Bank of Canada rate decision following the elections The highlight will be the Bank of Canada rate decision following the country’s elections. The September policy meeting statement gave no hint that further accommodation was being considered. Overall, they seemed to be satisfied with the impact of their recent reduction in rates and happy to remain on hold for some time. As for the currency, they mentioned approvingly that the fall in CAD is “helping to absorb some of the impact of lower commodity prices” and “facilitating the adjustments taking place in Canada’s economy.” As such, we don’t expect any action at this meeting, but we expect the Bank to keep alive the scenario for further cuts in the foreseeable future. That could leave CAD vulnerable in the medium term. The majority election win however, has removed the risk of a hung parliament and a prolonged period of uncertainty. Therefore, an optimistic statement and a positive tone in the press conference could provide short-term CAD-long opportunities. The Bank also releases the updated quarterly economic forecast and if they continue to believe that growth will pick up towards the end of the year and remain strong in 2016, this could also boost CAD somewhat, at least temporarily.

    • US housing data were moderately upbeat The number of housing starts rose more than forecast in September, while the more forward-looking building permits fell below expectations, data showed on Tuesday. It was the sixth straight month that starts remained above 1mn, pointing to a sustainable housing recovery. Although building permits declined from August, the weakness is likely to be temporary amid strong confidence levels among homebuilders. Overall, the data showed that the housing sector continues to steadily improve, even though economic growth has slowed recently.

    • Overnight Japan’s trade deficit narrowed in September but exports fell short of expectations. Japan’s trade balance has improved recently with the lower energy prices, but the slowdown in China and in other EM economies has stalled the recovery in exports. The reaction on USD/JPY was limited at the release and the rate stayed below the psychological 120.00 level.

    • New Zealand’s dollar came under increased selling pressure on Tuesday, after the fall in dairy prices in the latest auction. The fall, which followed four consecutive gains pushed NZDUSD below 0.6800. Kiwi has recently being on a rising mode, as investors scaled back expectations for a rate cut by the Reserve Bank of New Zealand at its October policy meeting. (see technical below).

    • Today’s highlights: The economic calendar is very light with no significant releases during the European trading session.

    • As for the speakers, besides BoC Gov. Poloz, BoE Governor Mark Carney give a lecture in Oxford. Fed Governor Jerome Powell speaks again. He was speaking on Tuesday but made no comments on monetary policy. So if we see any comments today that the Fed could raise rates this year, this could prove USD-positive.


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