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Poloz confirms dovish outlook - TD Securities

FXStreet (Guatemala) - Shaun Osbourne, Chief FX Strategist at TD Securities notes that USD/CAD has reached a fresh cycle-high at 1.1395, its highest level since July 2009 as declining crude oil prices and the dovish message from the BoC keep the CAD under pressure.

Key Quotes:

“If crude oil extends its declines on the day, we doubt an above-consensus Canadian trade print could offer much of an offset for funds’ climb higher, as short-term and daily charts continue to look bullish”.

“Medium term, the charts suggest 1.18 is reachable over the next few months."

"Indeed, Governor Poloz yesterday reaffirmed the broadly dovish impression of the Bank of Canada’s current policy position by reiterating in his speech that there is still “material slack” in the Canadian economy and that it may take up to two years to use up the excess capacity; he stressed that continued monetary stimulus would be required as the economy absorbs excess capacity and that stimulus may be required even after that point if “headwinds” remained."

"All in, the Bank is clearly in no rush to raise interest rates, it would appear. BoC dovishness is reflected in US-Canada spreads, where the recent narrowing in yield differentials has reversed in the short/belly of the curve (5-year spreads widened to +10bps yesterday from –3bps in mid October) and the headwinds for the CAD have been compounded by the renewed slide in oil prices, despite headlines yesterday suggesting that Saudi producers were pushing prices up again for Asian buyers (Saudi producers also announced significant price cuts for US buyers)."

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