high correlation Loonie at prices lower currency behind oil
the USD rose by 0.60 percent compared to the CAD over the past 24 hours. The currency pair is trading at 1.3359. Falling oil prices drove the USD / CAD above the level of 1.33 and price briefly traded at 1.34. CAD traders will be looking for the FOMC rate statement for signs of a growing divergence of monetary policy between the two nations. The Bank of Canada (BoC) is expected to keep rates unchanged until the second half of the year. The US Federal Reserve may show signs of a rate hike at the meeting June FOMC, which would boost the USD against the CAD.
The uncertainty around the freeze agreement of oil production from the OPEC (OPEC) and Russia after Iran aA said it would not join until the concerns of oversupply after production has almost doubled brought to the forefront. Saudi Arabia announced earlier in the week that there were no gains compared to production levels in January. The freeze on production has been able to stabilize the price of oil to the point where US stocks rose has not made a dent in the oil price there is a week rather focused on the application for gasoline increasingly as seen by a decrease in inventories.
West Texas crude fell 2.29 percent in the last 24 hours and continues a trend down since Iran comments and possible production date of the freeze of the summit was postponed to April. The global slowdown has reduced demand for energy along with the producers keep pumping at record levels. Iran has had to cut its oil production after a penalty period of 5 years and is looking forward to pre-sanction levels at least match before accepting a gel.
USD Earnings Before FOMC Meeting
the biggest movers of the day were the commodity currencies because of the volatility of the energy market. The USD rose against the CAD (0.73 percent) AUD (0.77 percent) and NZD (1.34 percent). Brexit fears have taken a toll on sterling. The Swiss franc is considered a safe haven and seems attractive to investors seeking to hedge against the impact of a Brexit. The GBP lost 1.19 percent against the CHF and 1.24 percent versus the USD.
U.S. Economic foundations have been mixed. Employment continues to be the strongest pillar, but deep cracks show through retail sales as consumers save more and spend less. The Fed had planned four rate hikes in 2016, but with the current economic conditions these expectations could be adjusted during the release of the Fed's economic projections.
There is anxiety in the markets that the US central bank could indicate a strong meeting in June as possible FOMC to announce a follow to higher rates in December. Canadian economic indicators Wednesday start the day with manufacturing sales less than expected last month to 0.4 percent. The strong Canadian dollar after the credit crisis in 08, supported by high oil prices, has made manufacturing in Canada too expensive and most of the manufacturing base moved to cheaper destinations. Now that the currency is not as strong, it proved a challenge to rebuild after the same erosion with a competitive advantage relative to wages. The prices of oil and Canadian manufacturing will define how the loon flies in the release of the FOMC and the press conference by President Yellen that could further boost the dollar.
Central banks have faced a difficult market that does not respond as expected to the official rhetoric and in some cases, a bold action of monetary policy. Canada is prepared to blaze a different path because it puts monetary policy on hold in favor of fiscal policy. The federal budget will be published in the March 22 and the market is waiting to see how the stimulus will be fat for a market that is more difficult to impress.
CAD events to watch this week:
Wednesday, March 16
8:30 CAD Manufacturing sales m / m
8:30 CAD Foreign Securities Purchases
10:30 USD gross oil stocks
2:00 p.m. USD FOMC economic Projections
USD FOMC Statement 2:00 p.m.
2:00 pm USD federal funds rate
2:30 pm USD FOMC Press Conference
Thursday, March 17
8:30 CAD Wholesale Sales m / m
Friday, March 18
8:30 CAD core CPI m / m
8:30 CAD base of retail sales m / m
8:30 CAD CPI m / m
8:30 am CAD retail sales m / m
* All times EST
for a full list of events planned for the visit of the foreign exchange market the economic calendar MarketPulse
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