CA BOC INTEREST RATE Sell 2, pair fall by 250(!) points according to the signal
An unexpected increase in the interest rate of the Bank of Canada came as a surprise of this week. This surprise is not only “weekly”, but also easily seems like the “event of the year”. Mario Draghi also noted, not keeping his promise - the discussion of the reduction of QE in September did not take place and it was postponed to October. The dollar remained subject to a “weather forecast”, then to a “political talk show.”
Fed: We had a plan and we stick to it
Representatives of the Fed continue to doubt the achievement of the target level by the inflation in the near future. It should be recalled that earlier the consumer price index fell in spite of the Fed's expectations, which provoked doubt in the market in relation to the third interest rate increase by the end of this year.
The weather conditions (hurricanes Harvey and Irma), as well as the sick head of Kim Jong Un, did their part, and the dollar gradually lost its positions this week.
If in July, according to the futures contracts from the CME Group, the probability of a rate increase in December was about 45%, then, at the moment, the chance of an increase is 31%.
The FOMC meeting will be held on September 20, and after that, we will receive additional information about the moods within the FOMC. For the time being, the dollar remains in the political arena, and the inflation statistics will appear the next week.
A small note on the Swiss franc
On Thursday, September 14, SNB meetings will be held. Please pay attention to this period, because at this moment there may be additional volatility not only in pairs with CHF, but also with EUR.
Lack of news - for the good of pound
GBPUSD rose by “about” 250 points this week, which is probably the greater merit of the dollar, as well as of the speculation rather than the reality of things. “No bad news is good news.” So, the pound showed stable statistics on the growth of industrial production, and the Service PMI index remains at its position of 53.2.
But already from Tuesday, GBP will begin to receive its portion of gruel.
Mario Draghi, traditionally on his way
Mario Draghi did not talk about the QE reduction, which was so expected by market participants (he promised it himself), which supported the euro after the ECB’s meeting and the press conference of the Bank's Chairman this Thursday. Draghi said: economic growth forecasts remain the same, inflationary expectations remain unchanged. Also, at the press conference, attention has been focused on “a strong euro, the growth of which may hamper economic growth in the future.”
Draghi promised to discuss the QE reduction in September, but now he postponed the issue to October. Now the market continues to overheat the euro and it will soon step over the red line.
Bank of Canada surprised with the second interest rate increased in a raw
The bank not only raised the interest rate this Wednesday, surprising many people but also reserved to itself the possibility of a subsequent rate increase this year!
The regulator noted an “unexpectedly strong economic growth in the second quarter of this year.” The Bank's further actions will primarily be predetermined by economic indicators in the future.
Against this background, the Canadian dollar not only grew by more than 200 points in the first minutes after the publication of the meeting’s results, but also continued its growth a day later.
On Friday, the labor market seems to confirm the optimistic mood of the Bank of Canada and showed a slight increase in the number of employed, as well as a little reduction in unemployment to 6.2% (previously it was 6.3%).
Against this background, CAD will remain significantly sensitive to its statistics in the near future.
The RBA left the interest rate unchanged
The Bank of Australia left the interest rate unchanged, and the quarterly GDP was published at the forecast level: the Australian economy added 0.8% in the second quarter of 2017. At the same time, the regulator is somewhat concerned about the increase in borrowings, which in turn were stimulated by a low interest rate (there is a hint at its increase). The full RBA minutes will be published only on September 19, and meanwhile, we will observe the release of labor market statistics next week.
Important events of the upcoming week
The pound will have to fill the gap in amounts of its statistics during the new week period, almost every day we will watch for any British release.
Pay attention to almost every day from the calendar of the next week. We should note: the labor market, the Great Britain’s consumer price index, and also the meeting of the Bank of England; special attention should be paid to inflation (CPI) from the United States, as well as the increase in their retail sales.
A full calendar of upcoming trading events that you can use for algorithmic trading can be found on the trading signals page.
CA BOC INTEREST RATE Sell 2, pair fall by 250(!) points according to the signal