Posted on March 3, 2015 by the XM Investment Research Desk at 3:09 pm GMT
The Canadian dollar rallied strongly after data showed Canada’s economy expanded faster – than- expected in the fourth quarter. GDP rose at a 2.4% annualized pace from October to December. Tomorrow’s Bank of Canada rate decision is the next risk event for the loonie. USDCAD fell to a low of 1.2433 after the data today, down from a day’s high of 1.2530.
The euro failed to sustain a rally against the dollar early in the European session. After a brief break above the key 1.1200 level, the single currency fell below yesterday’s 5-week low of 1.1159 to touch 1.1153.
Strong German economic data was not enough to keep the euro buoyed. German retail sales surged 2.9% month-on-month in January, much faster than the expected 0.5% and up from December’s 0.6%. However, disappointing Eurozone PPI data offset the good German data. Producer prices for January fell more-than-expected by 0.9% m/m versus the 0.5% decline that was forecast.
The key focus of the markets will be the European Central Bank’s policy meeting on Thursday. While the Bank is not expected to announce any new measures, market participants are eager to know more about the new QE program and when it will be launched. In its January meeting, ECB President Mario Draghi announced a 60 billion euros per month bond purchase program aimed at stimulating the Eurozone economy and fending off deflation.
Sterling declined for a fourth day today to touch a low of 1.5343 versus the dollar. Strong UK data today was not able to lift the pound higher. Construction PMI for February was much stronger-than-expected and rose to 60.1 from 59.1, up from January’s 59.1. Today’s report follows yesterday’s forecasting-beating manufacturing PMI. Meanwhile, focus turns to tomorrow’s services PMI.
The dollar failed to sustain gains above 120.00 yen hit early in the Asian session and eased lower to erase gains made over the past three days, falling to 119.40. The main driver of the dollar will be Friday’s US nonfarm payrolls report. Before this, tomorrow’s ISM Non-Manufacturing PMI would also be important to watch.
The Australian dollar held onto gains made after rallying on news that the Reserve Bank of Australia kept its benchmark interest rate unchanged today at 2.25%. By early US session trading, the aussie was up to a high of 0.7843. Tomorrow’s Australian GDP will be important to watch.