• Financial Institutions
  • Corporations
  • Travelers
  • SOLUTIONS
  • Foreign Bank Note Exchange
  • International Drafts
  • International Wire Transfers
  • Global EFT
  • Compensation De Chèques En Devises Étrangères
  • Traites Bancaires En Devises Étrangères
  • INDUSTRIES
  • Travel
  • Technology Companies
  • Payroll
  • Healthcare
  • Nonprofit
  • Partnerships

Bank of England keeps rates on hold with 7-2 vote

CXI December 19th, 2019

 

Interested in creating a custom foreign exchange trading plan? Contact us or call EBC's trading desk directly at 1-888-729-9716.

Get real-time market coverage on twitter at @EBCTradeDesk or sign up here.


 

SUMMARY

GBPUSD gyrates up and down with wishy-washy BOE outlook, but trend still down.
AUDUSD bounces on better than expected Australian employment report for November.
German and US 10yr bond yields on the cusp of major upside breakout, but Philly Fed miss could derail.
December Philly Fed survey comes in at just 0.3, versus 8.0 expected.
New USDCAD downtrend begins with swift move below 1.3150-60s yesterday.  Mild support at 1.3110s.
Bank of Japan kept all accommodative monetary measures in place last night.
USDJPY at risk of forming bearish outside reversal on daily chart today.
 

ANALYSIS

USDCAD

Dollar/CAD broke down to begin a new downtrend yesterday.  While we felt the market’s 40pt move lower (on the back of the 10yr high for Canadian median core CPI) was a bit of an overreaction, it was hard to argue to with USDCAD’s deteriorating technical outlook heading into the report.  The market had already given up 1.3150-60 chart support and so the subsequent fall to the 1.3110s was the path of least resistance in our opinion.  Traders have now stalled the market at this level, and it’s been this way since the NY close yesterday.  The overnight news flow has been dominated by Trump impeachment headlines and while we’d argue markets don’t care one bit about this political charade going on in Washington, we think at the very least it’s distracting traders a little bit this morning.

USDCAD DAILY

USDCAD DAILY

USDCAD HOURLY

USDCAD HOURLY

JAN CRUDE OIL DAILY

JAN CRUDE OIL DAILY

EURUSD

Euro/dollar bounced marginally in Asian and early European trade today as US 10yr yields dialed back some of yesterday’s gains, but the market has reversed back down to the low 1.11s as yields gun for the 1.95% level.  To be quite honest, we don’t know what global bond traders are cheering about over the last 24hrs.  Both the German bund yield and the US 10yr yield are on the cusp of major upside breakouts (above 1.95% and -0.22% respectively) and so we have to ask ourselves…is some big “risk-on” headline coming?  This could be big trouble for EURUSD.

EURUSD DAILY

EURUSD DAILY

EURUSD HOURLY

EURUSD HOURLY

FEB GOLD DAILY

FEB GOLD DAILY

 

GBPUSD

The Bank of England kept interest rates on hold at 0.75% this morning with a 7-2 vote.  This was the market expectation and the two dissenting votes came once again from Michael Sounders and Jonathan Haskel.  What’s been a little challenging to digest however is the BOE’s forward guidance, which sounds all over the place this morning.  Take these two, seemingly divergent, almost wishy-washy, takes on what may happen next:

  • IF GLOBAL GROWTH FAILS TO STABILISE OR BREXIT UNCERTAINTIES REMAIN ENTRENCHED, MONETARY POLICY MAY NEED TO REINFORCE EXPECTED UK RECOVERY

 

  • IF RISKS DO NOT MATERIALISE AND ECONOMY RECOVERS BROADLY AS EXPECTED, SOME MODEST TIGHTENING OF POLICY, AT GRADUAL PACE AND TO LIMITED EXTENT, MAY BE NEEDED

Here are some examples of what sounds like a rather balanced outlook going forward.  These two headlines don’t sound great…

  • CAN'T TELL YET HOW MUCH POLICY UNCERTAINTIES FOR COMPANIES AND HOUSEHOLDS HAVE DECLINED SINCE ELECTION

 

  • BOE STAFF CUT FORECAST FOR UK GDP GROWTH IN Q4 TO +0.1% QQ (NOV FORECAST +0.2% QQ)

…but these two sound relatively more positive.

  • GLOBAL GROWTH HAS SHOWN TENTATIVE SIGNS OF RECOVERY SINCE MPC'S NOVEMBER MEETING

 

  • PARTIAL DE-ESCALATION OF U.S.-CHINA TRADE WAR GIVES SOME ADDITIONAL SUPPORT TO OUTLOOK

???????

So naturally, sterling has been all over the place since 7amET as well; lower initially, then higher, and now lower again.  We would sum up the market’s reaction so far as a “ok, thanks for nothing Mark Carney…let’s stick with the current downtrend” sort of move.  The market lost chart support in the 1.3110s yesterday and it failed three times since then to regain it; one attempt of which came after this morning’s BOE announcement.  We think this negative technical development alone (what we call repeated buyer failure) is enough to explain why GBPUSD is now trading in the 1.3040s.

GBPUSD DAILY

GBPUSD DAILY

GBPUSD HOURLY

GBPUSD HOURLY

EURGBP DAILY

EURGBP DAILY

 


 

AUDUSD

The Aussie got a nice boost in the Asian session last night after Australia reported a better than expected November employment report.  The headline job gain of 39.9k beat estimates of +14k, and the unemployment rate ticked down unexpectedly from 5.3% to 5.2%.  This bit of economic news, plus a looming 1.1blnAUD option expiry at 0.6875, was enough to send AUDUSD higher to the 0.6870s in our opinion (Friday and Monday’s chart support level), but the market has been struggling ever since (as this level is now chart resistance).  We’ve also seen selling pressure come in once again for EUR and CNH this morning, which are AUD negatives.

AUDUSD DAILY

AUDUSD DAILY

AUDUSD HOURLY

AUDUSD HOURLY

USDCNH DAILY

USDCNH DAILY

 


 

USDJPY

The US 10yr yield and USDJPY have taken a bit of a hit here following the release of a weaker than expected US Philly Fed survey for the month of December (0.3 vs 8.0).  While this is just one negative data point, and comes after a barrage of risk-on headlines over the last week, we think it could be enough to derail a potential upside breakout in global bond yields.  The USDJPY daily chart, in particular, is now poised to form a bearish outside reversal…given last night’s head-fake above 109.60 and where we’re trading right now.  The Bank of Japan meeting was a non-event as usual last night as governor Kuroda reiterated his resolve to keep monetary policy extremely accommodative.  More here from Reuters.

USDJPY DAILY

USDJPY DAILY

USDJPY HOURLY

USDJPY HOURLY

US 10YR BOND YIELD DAILY

US 10YR BOND YIELD DAILY

Charts: Reuters Eikon


About the Author

Erik Bregar

Erik Bregar - Director, Head of FX Strategy

linkedin twitter

Erik works with corporations and institutions to help them better navigate the currency markets. His desk provides fast, transparent, and low cost trade execution; up to the minute fundamental and technical market analysis; custom strategy development; and post-trade services -- all in an effort to add value to your firm’s bottom line. Erik has been trading currencies professionally and independently for more than 12 years. Prior to leading the trading desk at EBC, Erik was in charge of managing the foreign exchange risk for one of Canada’s largest independent broker-dealers.

Interested in creating a custom foreign exchange trading plan? Contact us or call EBC's trading desk directly at 1-888-729-9716.

 

 

About Exchange Bank of Canada
Exchange Bank of Canada, EBC – Canada’s Foreign Exchange Bank, is the only Schedule 1 Canadian bank specializing in foreign currency exchange and international payments for financial institutions and corporations. EBC provides innovative foreign exchange management and integrated international payment solutions tailored to meet business needs on a global scale. Leveraging industry leading technology and a client-focused team of experts EBC delivers comprehensive, cost-effective and trusted payment processes and foreign exchange currency solutions to create financial and operational efficiencies. To learn more, visit: www.ebcfx.com.

Disclaimer: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement.
This publication has been prepared by Exchange Bank of Canada for informational and marketing purposes only. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which Exchange Bank of Canada, its affiliates or any of their employees incur any responsibility. Neither Exchange Bank of Canada nor its affiliates accept any liability whatsoever for any loss arising from any use of this information. This publication is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any of the currencies referred to herein, nor shall this publication be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The general transaction, financial, educational and market information contained herein is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a "call to action" or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. You should note that the manner in which you implement any of the strategies set out in this publication may expose you to significant risk and you should carefully consider your ability to bear such risks through consultation with your own independent financial, legal, accounting, tax and other professional advisors. All Exchange Bank of Canada products and services are subject to the terms of applicable agreements and local regulations. This publication and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced in whole or in part, or referred to in any manner whatsoever nor may the information, opinions and conclusions contained in it be referred to without the prior express written consent of Exchange Bank of Canada.