Important discourses from the North American central banks are expected to lift market volatility today, where the Canadian dollar is anticipated to gain opposite the US currency. The Bank of Canada is scheduled to release the nation’s Interest Rate Statement today, while US Federal Reserve Chairman Ben Bernanke is due to testify before the Senate Banking Committee in Washington DC.
Taking hints from equity price movements earlier during the day, Asian shares reversed their course to trade higher as investors awaited Federal Reserve Chairman Ben Bernanke's view on the US economy later in the day. Weak US retail sales of 0.5 percent for June plus a lower International Monetary Fund global growth forecast raised hopes of more stimulus measures from the Fed. Inclines were likewise recorded for most European stocks.
“Despite last week’s FOMC minutes showing that Ben Bernanke and the rest of the members had little urgency in getting a third round of quantitative easing started, traders are betting on a highly dovish performance from Bernanke as he testifies before Congress later,” Jonathan Sudaria, a trader at Capital Spreads in London, wrote in e-mailed comments.
The Fed chief is set to deliver his semi-annual report on the economy and monetary policy before Congress today and tomorrow. His testimony comes after data yesterday which shows that June retail sales declined 0.5 percent, kindling speculation that the Fed will introduce more measures to support the world’s largest economy. Recalling the minutes of the recent Fed meeting, two participants supported additional bond purchases, while two others said only a further deterioration in the economy would warrant them. Considering the labor market woes last month, as well as the flailing consumer spending numbers, more policy action seems warranted. It is therefore no surprise that the financial markets are excited over these speculations.
Meanwhile, the BOC is deemed to maintain its target for the Overnight Rate at 1.0 percent. Similar to how it was phrased in the last release, the rate statement is perceived to come out as saying that the Canadian economy continues to operate with a small degree of excess capacity. The recent GDP figure for April was at a robust 0.3 percent month-on-month from a rebound of 0.1 percent last March. Also, the jobless rate was recently lowered to 7.2 percent for June.
Also, Manufacturing Sales for the month of May is believed to register a strong rebound of 0.7 percent, almost the same as the wane in the April period. This is believed to boost the prospects of the Loonie further in the currency exchanges. Considering these fundamental data, a sell bias looks apt for the USDCAD exchanges today.
Written for AlgosysFx