BoE keeps rates on hold with unchanged 7-2 vote split. USDCAD under pressure again with weak technicals. EURUSD bid ahead of US CPI and large option expiry.

Summary

• USDCAD: Dollar/CAD is extending losses this morning, following yesterday’s plunge lower. The NY close was poor (right at 1.2850 support).  This level could not be regained in overnight trade and when EURUSD regained its composure in European trade, this was the queue for USDCAD traders to keep selling.  Chart support at 1.2800-1.2810 has given way today, leaving the market in a rather precarious spot should it not be regained soon (next support is 1.2740-50).  Next up is US CPI at 8:30amET.  Markets are expecting +2.5% YoY, +0.3% MoM and +0.2% MoM on Core.  We think USDCAD retains an offered tone here as its chart looks weak and the EURUSD and AUDUSD charts look stronger.  Crude oil is also up again this morning (+0.5%) following tensions between Israel and Iran in Syria overnight.

• EURUSD: Euro/dollar has regained its composure in overnight trade, rallying higher again after yesterday’s fail at trend-line resistance at the 1.1890-1.1900 level.  A 2.4bln EUR option expiry today is also likely helping the cause.  We still think EURUSD has the potential to bottom here near term should the market close above resistance.  Next up is US CPI at 8:30 and then be on the lookout for more movement once the options expire (10amET).

• GBPUSD: All eyes are on Mark Carney right now as he speaks to reporters following the BoE’s latest hold on interest rates.  While the hold on rates was expected by markets given weak UK data recently, we think the lack of change in the 7-2 vote split (for a rate hike) is disappointing some the hawks out there this morning (recall the chatter we said we were hearing yesterday about the possibility of a hawkish hold).  We continue to listen to this press conference and we don’t hear anything hawkish in our opinion.  Carney is stressing data dependency; he’s talking negatively about Brexit and he said “BOE isn’t trigger happy on interest rates”.  There you have it folks and explains why the knee jerk reaction was lower in GBPUSD and the bounce has been muted.  Up next is US CPI.

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About the Author

Erik Bregar - Director, FX Trading

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.

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