USD CAD Up Ahead of Bank of Canada Announcement
The USD CAD is trading better ahead of this morning’s Bank of Canada announcement at 8:00am CT. The BoC is expected to leave interest rates at 0.25 percent. It should also reiterate its stance to leave rates historically low until at least July 2010. This statement will be the key to the market’s movement today. If they move up the date then the Canadian Dollar should rally. Following last week’s robust increase in the number of jobs created last month, the BoC is no longer concerned about stagnation in the economy, but it is still worried about the negative effect a high priced currency will have on exports. The BoC monetary committee is going to have to be careful in how they word the statement because they don’t want to appear to bullish on the economy.
The EUR USD is trading lower this morning following a weaker than expected German Industrial Production Report. This report is taking out some of the steam in the market following comments from Bernanke which suggested the Fed was not yet ready to begin raising interest rates. The German report which showed industrial output fell 1.8% in October was a surprise but remember European Central Bank President Trichet has been warning that the economic recovery will be bumpy and rough.
Technically overbought conditions are once again helping the USD JPY give back gains following a huge surge to the upside last Friday following the release of the better than expected U.S. unemployment rate. The Dollar is paring gains versus the Yen following comments yesterday by Fed Chairman Bernanke who reiterated the Fed’s stance that interest rates would continue to remain low for a “prolonged period of time”. A sharp drop in equities could provide support for the U.S. Dollar versus the Yen if traders decide to unwind carry trade positions.
