Bank of Canada doubles down on dovishness Bank of Canada doubles down on dovishness Bank of Canada doubles down on dovishness

Bank of Canada doubles down on dovishness

Forex 5 minutes to read
MO
Michael O’Neill

FX Trader, Loonieviews.net

Summary:  Canada's central bank has removed all doubt that it will be following a dovish path in the wake of last week's major GDP miss, with officials citing trade tensions and the gathering global slowdown as the backdrop to their caution.


MIf traders weren’t convinced that the Bank of Canada’s monetary policy outlook was dovish, they will be after today. The BoC left interest rates unchanged at 1.75% as expected but the rest of the statement was a surprise.

It was very dovish. The Bank is concerned about a more pronounced slowdown in the global economy, blaming multiple trade tensions and uncertainty for weighing on confidence and economic activity. More importantly, it was spooked by last Friday’s weaker than expected Q4 GDP report, saying “the slowdown in the fourth quarter was sharper and more broadly based. Consumer spending and the housing market were soft, despite strong growth in employment and labour income. Both exports and business investment also fell short of expectations. After growing at a pace of 1.8% in 2018, it now appears that the economy will be weaker in the first half of 2019 than the Bank projected in January.”

USDCAD smashed through pivotal resistance at 1.3380 and is on track for a test of 1.3550 in the coming days. 

The US dollar index (USDX) is fast approaching a “make-or-break” level for US dollar bulls at 97.60 (61.8% Fibonacci retracement of January 2017- February 2018 range) on a daily chart. A break would target the 76.4% level at 98.82. For EURUSD, comparing the same periods, it suggests that a break below 1.1212 would open the door to further losses to 1.0898. Tomorrow’s European Central Bank (ECB) meeting could be the catalyst, especially if ECB employment and GDP results are worse than expected.

Bloomberg, citing “sources”, claims that the ECB will downgrade its growth and inflation outlooks enough to justify a new round of Targeted Long Term Refinancing Operations. The tone of ECB president Mario Draghi's press conference will be critical, especially if he is more dovish than usual.

The US dollar is little changed in a quiet New York session because of a lack of progress updates from the China/US trade talks and little top-tier economic data. The US ADP employment report (actual 183,000 versus a forecasted 189,000) was close enough to projections to be ignored. The widening of the US trade deficit (actual -$59.8bn versus a forecasted $57.9bn was attributed to “tariff-dodging” flows.

Wall Street opened with a snore. The major indices are either side of unchanged. Traders are awaiting fresh incentives to trade and this morning's data didn’t qualify. President Trump has been quiet, and there hasn’t been any news on the trade talks front. 
USDX
US dollar index (daily, source: Saxo Bank)
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.