NY Open: Bank of Canada hikes, signals more to come
FX Trader, Loonieviews.net
Summary: The Bank of Canada has deleted a key passage of rate hike caution, signalling hawkish intent and sending USDCAD sharply lower.
The BoC raised the overnight rate to 1.75% from 1.50% as widely expected and said: “Governing Council agrees that the policy interest rate will need to rise to a neutral stance to achieve the inflation target.” That implies another hike at the December meeting is now on the table.
The drop in USDCAD below support in the 1.3060-70 area turned the technicals negative but needs to break below the 1.2980-90 zone to suggest a short-term top is in place in the 1.3130-50 area. If not, it suggests further 1.2990-1.3150 consolidation. However, a break of 1.2990 would target 1.2800.
FX markets are skittish. Negative Brexit headlines and the EU/Italy budget wrangle isn’t helping sentiment, but the more significant concern is US equity market volatility. US stock markets tend to crash in October, with three October meltdowns at 10-year intervals since 1987. Traders are well aware of this phenomenon and perhaps, fears of being overdue for the next one, have them on high alert.
Equity traders are concerned about downgraded profit outlooks from some recent earnings reports, although today’s Boeing (BA:NYSE) and UPS: (UPS: NYSE) results disputed that notion. The Dow Jones Industrial Average is flat after opening with a small gain. The S&P 500 and NASDAQ are modestly lower as of 14:00 GMT.
The US dollar climbed steadily since New York opened with the euro being the biggest loser, dropping from 1.1471 to 1.1400, weighed down by the EU/Italy budget dispute. Sterling is the second biggest loser.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.
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