Forex Market News
The UK CPI came in as expected but wasn’t enough to hold above 1.63. A fair bit of US dollar profit taking overnight saw most currencies gain ground. This is to be expected running into the FOMC, which is only 22 hours away now. Some articles are attributing the turnaround to “speculation the Fed will maintain lower rates for a considerable time”. This has been the stance of the Fed anyway, but investors have read the growing US economy to force the Fed to move rates next year. We will see in the statement if the Fed’s stance reflects this or not.
The strongest bounce was in the commodity currencies as commodities saw big jumps across the board. Stocks too, saw the recent slide reverse as prices raced higher.
The biggest winner overnight though, hands down, went to the Canadians. Manufacturing sales came in at 2.5%, more than double the expected 1.1%. Also, Poloz stopped plonking in a speech later in the day. I have been saying for months that the Canadian economy is on the upward trajectory from the bottom of the cycle. Data like this is why I say it. Poloz, overnight seemed to agree. “We are cautiously optimistic about our exporting future,” Poloz, 58, said in a speech today in Drummondville, Quebec. While saying it will take more than a few months to establish a trend, Poloz said, “it looks like the natural sequence we’ve been hoping for is getting under way.”
Going one better, he out does our muppet of a Central Bank Governor and says “I believe in markets,” Poloz said.
Friggin brilliant! Love that comment and I am not being facetious! But wait, there is more good stuff here.
He goes on to say: “Manipulating or trying to guide them is just not in our game plan. Trying to control the Loonie is off the table, a floating loon is a thing of beauty, and so is a floating Loonie. The central bank would only intervene in an emergency situation where currency markets failed. While the central bank closely analyzes the impact of exchange rates on the economy, it doesn’t target a specific value for the Loonie” Poloz said.
Now, if only all central bankers took a maple leaf out of his book. About time they stooped the manipulation of the market and let a free market find true price discovery. We wouldn’t be in the financial mess the global economy is still in. Severe stagnation in Europe, huge debt in the US and slow growth around the world. Stick to what your mandate is, and in most cases the Central Bank mandate (Canada, UK, Australia, NZ, Europe) is to control inflation. Then there is the privately held, privately run US Federal Reserve. A law unto themselves.
The FOMC is the largest news announcement on the economic calendar. Whilst I do not expect any change in the fund rate, nor do I expect any change in the statement, and I do expect them to “taper” QE again, it is the press conference afterwards that will be interesting. What and how Aunty Janet Yellen responds to specific questions could see large market volatility. It is what everyone is positioning and waiting for. When will the US interest rates rise of 0.25%??