Currency Market Trend Analysis: October 24, 2017

By The Numbers: Your FX Week In Review

Currency Calendar

Upcoming bank holidays and impactful report releases for select countries.

Market Analysis

CAD/USD - Canadian Dollar

Opened last week at 0.7979 and closed at 0.7923.

The CAD fell by 0.69% against the USD as Canadian data disappointed, despite rising oil prices. CPI rose 0.2% against 0.3% expectations, while retail sales contracted 0.3% and sales excluding the auto sector dropped 0.7% MoM, both below expectations. As a result, market expectations for a rate hike before year end have been cut from 80% to 53%. These data-related woes were exacerbated by Trump-driven concerns over the future of NAFTA. It is unlikely coming off of this data that the BoC will hike rates this week, leaving relatively little Canadian data to affect the market. The CAD may continue to trade lower against the USD in the coming weeks while markets are caught up in potential US tax reform. A BoC rate hike will likely usher back in a return to appreciation. 

1. BoC Monetary Policy Report: Wednesday, October 22^nd   

2. BoC Interest Rate Decision: Wednesday, October 22^nd   

GBP/USD - British Pound

Opened last week at 1.3284 and closed at 1.3178.

The sterling tumbled by 0.80% against the greenback last week, despite marginally improved wage data, and encouraging statements on Brexit from Angela Merkel. Early in the week, the GBP was hit by a Bloomberg report noting that Brexit negotiations could be headed for a breakdown if the EU refuses to compromise. GBP volatility is on the rise, driven by fears that further breakdowns in Brexit negotiation could hurt PM May’s tenuous position. Fears that May cannot convince her party to unify were exacerbated when Home Secretary Rudd contradicted May’s statement that no deal is better than a bad deal. These concerns were partially assuaged when European Council President Donald Tusk stated that “they succeeded at today's summit to rebuild an atmosphere of trust with the UK on Brexit”. This week’s movements will depend largely upon the results of Wednesday’s GDP data, as well as further Brexit developments. 

1. GDP (Q3): Wednesday, October 22^nd      

EUR/USD - European Central Bank Euro

Opened last week at 1.1810 and closed at 1.1769.

Over the past week, the Euro depreciated by 0.34% against the USD, as Catalan-related political uncertainty continues to grow, and the USD received a boon from a step towards tax reform. This week focus will primarily lie on the Monetary Policy Statement and any forward guidance relating to the EMU tapering program. The current expectation is that the ECB will prolong asset purchasing beyond Dec, but cut the volume by $10bil a month, starting in January, until the program ends. EUR political uncertainty peaked over the weekend as the Spanish government invoked Article 155, allowing the takeover of the Catalan government. A House vote is expected this Friday on the Article. Catalan President Puigdemont has stated that he will declare independence if Article 155 goes into effect. The EUR is likely to trade lower throughout the week as Catalan uncertainty mounts.  

1. ECB’s Praet Speech (EMU): Monday, October 9^th    

2. PMI’s (EMU, Germany, France): Tuesday, October 21^st      

3. ECB Interest Rate Decision (EMU): Thursday, October 23^rd       

4. ECB Monetary Policy Statement and Press Conference (EMU): Thursday, October 23^rd         

Charts: TradingView

About the Author

 Collin McAliley - Financial Analyst

Collin educates corporate clients on foreign currency markets lending industry best practices that enhance client knowledge and create specialized solutions that fit each business. Interested in having a custom international payments strategy or foreign exchange risk plan?