EncoreFX’s daily market updates are written by our experienced and professional dealing team.
Markets Await Bank of Canada Rate Decision
Published September 6, 2017
The Bank of Canada will be making its rate statement at 10:00am EST today, and the probabilities have now moved below yesterday’s 50% chance of a 25-point rate increase. The consensus seems to be that a rate increase is justified, but that the BOC will wait until October before raising rates again. As mentioned yesterday, despite strong Canadian data, patience is warranted due to the risks we are still seeing relating to NAFTA, Canadian debt levels, a cooling housing market in Canada, and a rather dovish Fed
The Canadian July trade deficit beat expectations, decreasing to $3 billion vs. an expected $3.2 billion, largely driven by a strong Canadian dollar which made imports cheaper while discouraging exports. A lower trade deficit is often supportive of a country’s currency, though the number should not be viewed in isolation. EDC Chief Economist Peter Hall suggested the decline in exports could be partially explained by longer than usual shutdowns in the automotive sector, and that declining exports are something that need to be watched, and it is not great news if it persists
In a speech yesterday Federal Reserve Governor Brainard expressed concerns about low inflation levels in the U.S., and urged caution before raising rates again. Though this makes the future rate path in the U.S. uncertain, markets are still expecting the Fed to announce plans to begin unwinding its $4.5 trillion balance sheet
Oil prices continued to move higher this morning as demand continues to recover and U.S. oil refineries continuing to come back online. At the time of writing, WTI was up 0.86% on the day to $49.08, and Brent Crude was up 1.12% to $53.98. The U.S. Energy Information Administration will be releasing data tomorrow, with expectations for an increase of ~5 million barrels in crude stockpiles