European Session – Loonie falls after BOC holds rates and Canadian business survey disappoints


Michalis Florentiades, XM Investment Research Desk

The euro consolidated against the dollar during today’s European session, after Tuesday’s impressive rally, as further gains were limited ahead of Thursday’s European Central Bank policy meeting. Some analysts believe that the ECB might be pressured to come up with a decision on further stimulus measures. The euro touched session lows of 1.1228 and highs of 1.1271 against the dollar.

The pound dipped to a new intra-day low of 1.3350 dollars just before Mark Carney, Governor of the Bank of England, started testifying in parliament before the Treasury Select Committee. Carney defended the Bank’s response to the Brexit crisis and attributed part of the bounce back in economic activity in August to the BoE’s stimulus measures. MPC members Kristin Forbes and Jon Cunliffe also testified and signalled that another rate cut this year is possible. But the pound steadied and firmed towards the end of the testimony, rising to 1.3396 dollars.

The US released JOLTS labour turnover data which was quite upbeat and helped lift the greenback. The number of job openings rose in July to 5.9 million openings compared to 5.62 million job openings in June. The report is a good barometer for the US labour market and is closely watched by the Fed. The dollar rose against the yen after the data but remained within the session range of 101.29 to 101.71 yen.

The US currency saw bigger moves against the Canadian dollar after the Bank of Canada’s decision to hold rates at 0.5%. The policy hold was widely anticipated but the central bank raised concerns about the strength of the Canadian economy. Also, some disappointing Canadian economic news regarding a business survey contributed to the loonie’s weakness. The August Ivey PMI fell to 52.3 from 57.0 and missed the 55.4 forecast. The USDCAD pair jumped to $1.2905 after the data, moving off a session low of $1.2821.

CAD

Oil prices started to pull back after having risen in the earlier part of the European session. There is a lack of clear direction recently in oil prices as markets await an OPEC meeting later this month to see whether a deal to curb a global oil glut can be reached. Brent crude, the international benchmark, rose to a high of $47.91 a barrel during the session before easing to $46.97, while WTI oil, the US benchmark, rose to $45.40 and fell to $44.55 a barrel.

Gold held onto gains made yesterday after the disappointing US ISM non-manufacturing number dented the dollar. The precious metal traded to a session high of $1351.21 before sliding to $1343.62.