The dollar struggled to make any ground once again against most of the major currencies again yesterday, it did show brief signs of life early in the London session as Euro was hit on the back of potential trouble for Angela Merkel’s grand coalition in Germany. News that the coalition deal could be at risk pushed the single currency down towards 1.2200 however, it swiftly made back that ground over the rest of the day and has now hit new highs above 1.2300 early in today’s Asian session. This move was mirrored across the major currencies and the Dxy is once again looking vulnerable as we move into the Asian session.
Looking ahead to today’s trading and the markets main focus will be the Bank Of Canada’s Rate announcement in the New York session. Prior to this, we have the Final CPI data out of Europe and Industrial Production and Capacity Utilisation numbers out of the US, however the BOC will dominate the later part of the day.
Market expectation is still firmly in the 0.25 bps hike camp although there are many market participants that feel the bank may hold in light of the risks presented by the upcoming NAFTA talks. The statement around the announcement and subsequent Press Conference will be crucial to the moves in the Loonie, with expectation that any hike will be accompanied by more dovish forward guidance and any hold with a more hawkish stance. We feel the risk is definitely on the side of a hold which should result in pressure on the Cad, with a hike giving limited upside due to doubts over the upcoming NAFTA talks.
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