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All Eyes on Poloz; Oil Prices Fall Ahead of Inventory Data

Published October 25, 2017
  • Yesterday, Canada’s finance minister, Bill Morneau, pointed to stronger-than-expected economic growth as proof the Liberal strategy of deficit spending had paid dividends in the two years since Prime Minister Justin Trudeau won a surprise majority. Morneau’s update had little impact on financial markets, but the additional stimulus may give the BoC more room to continue to hike interest rates.
  • The Bank of Canada’s interest rate decision is due today at 10am EST. Most experts are expecting the central bank to hold its benchmark rate at 1.0%. Chances of a rate increase today have sunk to about 20% from nearly 50% in mid-September. The BOC surprised many by hiking rates for the second consecutive time at its previous meeting in September, but markets are pricing in the next possible rate hike for December.
  • The European Central Bank’s interest rate decision comes tomorrow. There are no expected changes to the rates. There are expectations, however, that the ECB will announce plans to taper and extend its asset purchasing program.
  • The greenback got a small lift today after a report that Republican senators were leaning towards John Taylor to be the next Federal Reserve Chief.  Taylor is seen as someone who could quicken the pace of interest rate increases compared with Fed Chair Janet Yellen, whose term expires next February.
  • China’s ruling Communist Party broke with recent precedent today, unveiling a new leadership line-up without a clear successor to President Xi Jinping, who has become arguably the most powerful Chinese leader since Mao Zedong. All seven of the Standing Committee members are men in their 60s and, for the first time, none were born before China’s 1949 Communist revolution. The Standing Committee has ultimate control over the world’s second-largest economy and the make-up of the committee appeared to be a compromise to include a blend of Xi allies and those considered loyal to party elders.
  • Oil prices traded lower today as investors prepare for official data on US crude oil inventories at 10:30am EST; expectations are for a decline of roughly 2.6 billion barrels. Brent Crude is down ~0.15% on the day trading at $58.20/barrel with WTI Crude down ~0.50% on the day trading at $52.20/barrel.