Forex news for North America trade on October 27, 2021:
- Bank of Canada prematurely ends bond buying program in surprise decision. Loonie jumps
- Bank of Canada full statement and Monetary Policy Report
- Macklem opening statement: Likely less supply in the economy than believed
- Macklem Q&A: We believe there are good reasons for inflation to ease in 2022
- US September durable goods orders -0.4% vs -1.1% expected
- Sen. Sinema: We are making progress after meeting with White House
- U.S. Treasury auctioned off $61 billion of 5 year notes at a high yield of 1.157%
- Final Atlanta Fed GDPNow forecast sees just 0.2% growth in Q3
- EIA weekly US oil inventories +4267K vs +1914K expected
- US September wholesale inventories +1.1% vs +1.2% prior
Markets:
- Gold up $4 to $1796
- WTI down $2.48 to $82.18
- US 10-year yields 7.8 bps to 1.54%
- S&P 500 down 22 points to 4553
- JPY leads, GBP lags
The Bank of Canada surprised markets by skipping a step on the taper plan and going directly to zero from $2B/week. There were some musings about the possibility but no economists were predicting it. In addition, the BOC moved up the estimation of when the output gap would close (and when they'll hike rates) to the 'middle quarters' of 2022 from H2. As you might expect, the loonie jumped on the headlines. It had touched a two-week low just ahead of the BOC and jumped 125 pips on the report. Notably though, it narrowly lost out to the yen as the best performer on the day as global yields mostly fell and some risk aversion crept in. Crude also had its worst day in three weeks.
AUD/USD was another mover today after the surprise jump in core CPI. After a drop early in Europe it climbed all the way back to retest the 0.7535 high but couldn't break through. Some late selling in risk pulled the pair 20 pips from the highs.
The euro was choppy in a 1.1590 to 1.1620 range ahead of tomorrow's ECB. There's a solid expectation that they'll push back on rate hike expectations and inflation worries but the BOC will certainly have a few people questioning that assumption.
The big question coming out of the day is whether the moves today are about month-end flows, profit taking and repositioning or a sign of a bigger turn. Certainly the meme stock rallies and joke-coin rallies look like a market closer to 'euphoria' than the opposite.
