Forex headlines for January 22, 2014:
- Bank of Canada maintains neutral stance but edges toward dovish
- BOC: Future of balance of risks has tilted slightly lower on inflation
- Bank of Canada cuts inflation forecasts for 2014, 2015
- BOE’s McCafferty: MPC sees no immediate need to raise interest rates even if unemployment hits 7% in near future
- EU throws out UK challenge to short selling law
- France will honour pledge to bring deficit back below 3% of GDP in 2015
- EU’s Olli Rehn claims victory in Spain
- S&P 500 up 1 point to 1845
- NASDAQ closes at highest since 2000
- Gold down $4.60 to $1237
- WTI crude up $1.88 to $96.85
- GBP leads, CAD lags
The US was snowed in and the calendar light on Wednesday so the Bank of Canada had the spotlight all to itself. The talk was about the BOC shifting to a dovish bias but they stayed neutral. In the end, it didn’t matter. Lower inflation forecasts and some modest jawboning were more than enough to send USD/CAD up by more than 100 pips to a fresh 4-year high at 1.1092. What’s more is that the pair is poised to close near the highs of the day.
Elsewhere the market was in a daze. Another round of upbeat UK data send cable through 1.65 to 1.6587 but the damage was done before US traders arrived. Some fixing demand sparked a marginal new high but nothing to get pulses racing.
EUR/USD touched a three-day high at 1.3583 on a spike higher at the start of US trading but sagged from there to end lower on the day at 1.3545. The short-term charts are showing a modest series of higher lows, so there might be something the build on tomorrow. Or something to break.
USD/JPY has been stuck in the mud for most of 2014. A break of 104 in Asia perked up traders but it only lasted a moment and then ripped to 104.50. US trading was dull in a 104.25 to 104.50 range.
AUD/USD got a bit lift from the CPI numbers but what’s surprising is that it didn’t last. The data was way above expectations and that’s the kind of headline that could cause a protracted squeeze in a crowded short trade. Instead, the shorts showed a rocksteady hand and if that lasts, it’s a bearish sign.
