NY Open: US dollar firm to end the week
Summary: US stock markets are sounding a slight tentative note, but the January rally remains firmly intact in early trade.
FX traders seem to want to believe that the US and China will come to terms on trade.
USDCAD was in the spotlight at 1230 GMT when Canadian inflation data was released, but despite great number, it is currently close to unchanged since Monday. CPI rose 2.0%, year-on-year, in December, easily beating the forecast for a gain of 1.7%. Core CPI rose 1.7%, y/y.
Last week, the Bank of Canada said in its monetary policy statement that low oil prices would depress inflation rates throughout 2019. That may be why USDCAD losses following the data evaporated as quickly as they did. USDCAD dropped from 1.3270 to 1.3235 and then climbed back to 1.3260. It also may be because the US dollar was grinding higher against the majors.
The European Central Bank and Bank of Japan policy meetings, plus the Davos forum should be the main attractions next week. EURUSD bulls may be disappointed. Mario Draghi’s dovish remarks to the European Parliament suggest another cautious ECB statement is on the cards, with the ECB chief stating that “a significant amount of monetary-policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term.”
Davos may not be very exciting now that President Trump cancelled, but traders won’t mind as their attention will be focused on UK politics and Brexit developments. There are only 70 days until the March 29 deadline and the British plan is in disarray. GBPUSD and GBP crosses are vulnerable to sound bites and headlines. US markets are closed on Monday, for Martin Luther King Day.
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