Daily Market Commentary

Thursday, 27 July 2017 - Market Commentary

Calvin Kuk

US Dollar vs Canadian Dollar

: The Canadian dollar gained half a cent against the USD yesterday after the Federal Open Market Committee released its statement to the market. The loonie continues to outperform after an interest rate hike this month. This is an accommodative silence between the Bank of Canada and the Liberal Government. Prime Minister Trudeau and his Finance Minister Morneau are concerned that Governor Poloz has moved too quickly on raising interest rates, but it is customary to stay out of each other business. Canadian household debt is at all-time highs, and Trudeau's middle-class poster family may find itself tightening up on spending, as borrowing costs go up. The Canadian economy has relied upon the consumer spending for economic recovery and growth since the 2008-09 financial crisis.

In the FOMC statement yesterday, the central bank said it would remain accommodative on monitory policy and continue to monitor labor conditions and inflation. The Feds objectives are full employment and a 2% inflation target. Inflation is expected to remain under target for some time and any chance of a rate hike this year was ruled out by investors; as a result the Greenback fell against its currency counterparts. The Committee statement also read the Fed would maintain its policy of reinvesting in sovereign debt and rolling over of maturing treasures. The Fed also said it would start the normalization of its balance sheet program relatively soon. Durable Goods Orders on deck today along with weekly Initial Jobless Claims. Expectations on Durable Goods Orders were for 3.9%, and orders soared to 6.5%, Initial Jobless Claims came in at 244k forecasts were for 241K while previous was 234K. JS

The expect a range today of 1.2412 to 1.2533

Canadian Dollar vs Euro and Great British Pound

: The German fundamentals continue to release this week, as their Consumer Confidence Survey in August printed better than expected at 10.8. Some more hawkish comments from the ECB yesterday, as Nowotny mentioned that even though inflation was still low, policy setting should be evaluated as there is no more risk of deflation. The ECB is expected to begin winding down QE after the summer. The EUR is currently trading at 1.4597. CK

We expect a range today of 1.4524 to 1.4638

No significant event risk out of the UK yet until later this evening when Consumer Confidence in July release, which is forecasted for -11. CBI Realized Sales, a second tier data, printed better than expected at 22. News has been reported that another one of PM May’s team, her chief political strategist, has left. The GBP is currently trading at 1.6407. CK

We expect a range today of 1.6342 to 1.6447

Canadian Dollar vs Australian Dollar and New Zealand Dollar

: On Wednesday the AUD fell on the back weak Australian CPI figures. The Aussie, however, was able to reverse the losses and surge above the key resistance level during the Asian trading session overnight following the less hawkish FOMC statement. Firmer commodity, especially in iron ore and copper, also helped to give the AUD a boost. AUD/USD tested a new high just above 0.8060 before trading back lower towards the 0.8000 level in the North American trading session this morning. Tonight we will get Australian Producer Price Index data at 9:30 pm EST. FC

Oil (WTI): 48.74

Gold: 1263.12

Silver: 16.80

Copper: 2.88844

Dollar Index: 93.74

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