There is no doubt that central banks drew all markets’ attention today with the euro and the British pound being the most volatile currencies. Firstly, some rumors said that ECB suggested financial markets misinterpreted comments from Mario Draghi on the rise of inflation caused an immediate decline in the euro which was quite quickly wiped off though.
In turn, BoE’s Governor Carney exerted massive upward pressure saying that ome removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen. He added that BoE’s tolerance to above-target inflation remains limited. That kind of hawkish comments were contrary to his view voiced around two weeks ago as he claimed that there was no time to hike rates. On that account, investors decided to put their money into the GBP assuming a possible rate hike as soon as this year.
The Canadian dollar was performing really weak against the USD over the course of the past year. However, things could have already changed as the BoC has become decisively more hawkish as some of members have called into questioned a need for further monetary policy stimulus given the current stance of the Canadian economy and their expectations. For that reason we decided to prepare the longer-term view on the USDCAD taking into account many aspects.
Given the above-mentioned analysis of the Canadian dollar it’s worth mentioning that the DOE report showed a build in oil inventories but it was a very tiny and while original expectations saw a draw, markets were prepared for even a worse report after the API release yesterday. There was a somewhat surprising decline in output. It is partly a result of stoppages in Alaska yet decline is decline.