Canadian dollar pares some gains in early US session after BoC left rates unchanged at 1.00% as widely expected. The overall tone of the statement was unchanged, noting risks associated with sovereign debt crisis in Europe and strength in strength in commodity prices. Also, the bank noted challenges from strength in the Canadian dollar as well as the country's poor relative productivity performance. After all, the bank believes, the current monetary policy is consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada Also, any further reduction in monetary policy stimulus would need to be carefully considered.
Next focus will be on US ISM manufacturing index and Bernanke's semi-annual testimony before the Senate Banking Committee today. The Fed chairman is expected to be pressed hard on questions on inflation and the impact of Fed's on-going quantitative easing strategy. But Bernanke, while would acknowledge improvements in growth outlook, will likely remain cautious and hints it's premature to exit any accommodative measures for the time being. Before that, ISM manufacturing index will be a main focus too and is expected to be steady at 60.5 in February.
Sterling hit 13 month high against dollar earlier today on solid data and comments from BoE King. While King said there isn't significant evidence of a pickup in medium-term inflation expectations he did acknowledged that if we continue to experience above-target inflation for long enough there could be an upside risk to inflation expectations. Manufacturing PMI held at record level at 61.5 in February. Nationwide house price rose modestly by 0.3% in February.
EUR/USD stayed in tight range even though data showed that inflation rose to 28 month high of 2.4% yoy in February, continue to stay above ECB's target for the third month. Employment data were also positive with unemployment rate dropped to 9.9% in February. German unemployment dropped more than expected by -52k while unemployment rate also improved to 7.3%. Markets are getting cautiously ahead of ECB rate decision.
Australian dollar is mildly lower after RBA. As widely expected, the RBA kept the cash rate unchanged at 4.75% as inflation remained contained. The accompanying statement delivered a neutral tone as policymakers see balanced risks to growth and inflation outlook. For the first time in the current tightening cycle, the RBA stated that the current stance of monetary policy is 'mildly restrictive'. Yet it remained 'appropriate in view of the general macroeconomic outlook'. More in RBA On Hold, Sees Only Moderate Inflationary Pressure.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 0.9686; (P) 0.9738; (R1) 0.9766; More.
USD/CAD dips further to as low as 0.9683 in early US session before recovering mildly. Nevertheless, with 0.9757 minor resistance intact, intraday bias remains on the downside. As noted before, daily MACD has broken recent up trend line, which suggests that USD/CAD is building up downside momentum again. Current fall would now target 161.8% projection of 1.0851 to 1.0138 from 1.0671 at 0.9517 next. On the upside, above 0.9757 minor resistance will turn bias neutral and bring consolidations. But break of 0.9836 support turned resistance is needed to be the first sign of bottoming. Otherwise, outlook will remain bearish.
In the bigger picture, whole medium term fall from 1.0363 (2009 high) is still in progress and such down trend could possibly extend further towards 2007 low of 0.9056. Nevertheless, fall from 1.3063 is still looking corrective and hence, we'd expect strong support between 0.9056/9709 to contain downside and bring another medium term rise. Though, break of 1.0851 resistance is needed to confirm medium term reversal. Otherwise, medium term outlook will remain bearish.
Economic Indicators Update
|23:30||JPY||Household Spending Y/Y Jan||-1.00%||-1.30%||-3.30%|
|23:30||JPY||Unemployment Rate Jan||4.90%||4.90%||4.90%|
|00:30||AUD||Current Account (AUD) Q4||-7.3B||-6.9B||-7.8B||-6.5B|
|00:30||AUD||Retail Sales M/M Jan||0.40%||0.30%||0.20%|
|01:00||CNY||PMI Manufacturing Feb||52.2||52.1||52.9|
|01:30||JPY||Labor Cash Earnings Y/Y Jan||0.20%||0.30%||-0.40%||0.10%|
|02:30||CNY||HSBC Manufacturing PMI Feb||51.7||--||54.5|
|03:30||AUD||RBA Rate Decision||4.75%||4.75%||4.75%|
|06:45||CHF||GDP Q/Q Q4||0.90%||0.50%||0.70%||0.80%|
|06:45||CHF||GDP Y/Y Q4||3.10%||2.70%||3.00%||2.60%|
|08:30||CHF||SVME PMI Feb||63.5||60.5||60.5|
|08:55||EUR||German Unemployment Change Feb||-52K||-13K||-13K||-18K|
|08:55||EUR||German Unemployment Rate Feb||7.30%||7.40%||7.40%|
|08:55||EUR||German PMI Manufacturing Feb F||62.7||62.6||62.6|
|09:00||EUR||Eurozone PMI Manufacturing Feb F||59||59||59|
|09:30||GBP||PMI Manufacturing Feb F||61.5||61.5||62||61.5|
|09:30||GBP||M4 Money Supply M/M Jan||0.80%||--||-1.00%|
|09:30||GBP||M4 Money Supply Y/Y Jan||-1.70%||--||-2.00%|
|09:30||GBP||Mortgage Approvals Jan||45.7K||42.5K||42.6K||42.7K|
|10:00||EUR||Eurozone CPI Estimate Y/Y Feb||2.40%||2.40%||2.40%||2.30%|
|10:00||EUR||Eurozone Unemployment Rate Jan||9.90%||10.00%||10.00%|
|14:00||CAD||BoC Rate Decision||1.00%||1.00%||1.00%|
|15:00||USD||Construction Spending M/M Jan||-0.40%||-2.50%|
|15:00||USD||ISM Manufacturing Feb||60.5||60.8|
|15:00||USD||ISM Prices Paid Feb||81.5||81.5|