ECB’S INTEREST RATE DECISION IN THE SPOTLIGHT
The euro jumped and then pared gains at the open of the Asian session. This was as traders looked ahead to the upcoming interest rate decision by the ECB and the start of EU and US negotiations on trade. The ECB is expected to leave interest rates unchanged and issue forward guidance on the fate of the quantitative easing program and future interest rates. Previously, the bank said it would end QE in January and start raising rates after summer next year. Last week, US Commerce Secretary, Wilbur Ross warned his EU counterpart, Cecilia Malmstrom, that US President Donald Trump will not tolerate any kind of delay. In July, the US President made a deal with the President of the European Commission to ensure zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.
The USD/CAD declined sharply and then pared gains in early trading today. On Friday, Canada released inflation numbers that missed analysts’ forecasts. In September, CPI rose at an annualized rate of 2.2%. This was lower than the 2.7% that traders were expecting, and the previously-released 2.8%. The core CPI that excludes food and energy products was 1.5%, which was lower than the consensus of 1.8%. This week, the BOC is expected to raise interest rates for the second time this year. Traders will want to know the bank’s view on the slowed inflation rate.
The price of crude oil was little moved after pressure mounted on Donald Trump to react to the murder of journalist Jamal Khashoggi by Saudi authorities. Traders are also closely watching Iran sanctions that are due to start next month. US leaders from both sides of the political isle have asked the US President to impose sanctions on Saudi. Yesterday, Treasury Secretary, Steve Mnuchin said that while he will not attend the Future Investments Initiative, he will travel to Saudi to talk about terrorist financing. This will be a closely-watched trip because his post is responsible for sanctions.
The EUR/USD pair jumped sharply at the start of the Asian session. It reached an intraday high of 1.1570, which was the highest level since Wednesday last week. These gains were short-lived and the pair fell to a low of 1.1497 and then started to move up. The biggest mover for the pair this week will be the ECB decision and the US GDP numbers. When the pair jumped today, the price moved above the upper band of the Bollinger Bands and is currently along the upper band. There is a likelihood that it will attempt to recover some of these gains today.
The USD/CAD pair fell and then recovered suddenly in the Asian session. It reached an intraday low of 1.2980, which was the lowest level since Friday. It is now trading at 1.1.3095, which is closer to Friday’s high. This level is higher than the 28 and 14-day moving average. Today, the pair is likely to continue moving upwards as traders wait for the statement from the BOC.
The XBR/USD was little moved today as traders paid attention to ongoing fundamental news from Saudi Arabia and Iran. This was after last week’s decline of the pair which fell from 86.6 to a low of 78.8. It is now trading at the 79.45 level. The RSI is currently at 50, which is a neutral level meaning that the pair could move in either direction.