As traders in the United States return to their desks after yesterday’s bank holiday, there is a semblance of calming optimism that is permeating through financial markets. With the Bank of Japan, Bank of Canada, and European Central Bank all set to hold policy decisions this week, this is likely the calm before the storm, as all three major central banks are expected to strike progressively more dovish tones at their respective meetings, widening the divergence in monetary policy trajectory between the United States and the rest of the developed world. The economic numbers that have soothed market participants this morning were the GDP growth figures for Q4 in China that were released last night. Though it was the slowest pace of growth since 1990, and the first time since 1998 when growth has slipped below the ruling party’s GDP target (set at 7.5% 2014), the number came in slightly above expectations and reassured investors the soft landing was still on track. The final number for y/o/y GDP growth was 7.3%, coming in just above expectations of 7.2%, and bang on the same pace of growth registered in the third quarter. Industrial output, retail sales, and fixed asset investment for December which were also reported last night, all came in right around expectations as well, completing the “goldilocks” set of data out of China. Industrial output grew at 7.9% and retail sales rose by 11.9% on an annualized basis, both besting the median analyst forecast, while fixed asset investment missed slightly with a print of a 15.7% increase. The not-too-hot and not-too-cold strength of the Chinese data rounding out 2014 suggests no major policy changes for the government, with targeted stimulus measures being favoured over a large scale scorched earth easing campaign. The Shanghai Composite managed to rebound from yesterday’s rout to post a gain of 1.8% on the session, while the Nikkei added 2.1% to its valuation as the yen cedes ground to the greenback with USDJPY rising into the mid-118s. Heading over to Europe where positioning squaring is the name of the game ahead of Thursday’s ECB meeting, the major bourses are firmly in the green as broad based positive sentiment boosts equity performance. The German investor survey conducted by the ZEW institute came in better than expected this morning as well, printing at 48.4 and marking the third month in a row that sentiment has beaten the median analyst estimate. Current conditions were also bumped higher for the month of January, with the reading of 22.4 a marked improvement from the 10.0 that was registered in December. The improving sentiment data has done little to help the euro this morning, with EURUSD sliding back into the high-1.15s and reversing the short-covering position squaring that was seen yesterday. As we get set for the opening bell in North America, S&P equity futures are well in the green, while the hydrocarbon complex continues its struggle with stabilization as light crude futures dip back to the $47 handle , though WTI looks comfortable in a consolidative pattern in the $45-$50 range. Next to the yen and the kiwi, the loonie is the worst performer in the currency space this morning, with expectations of a dovish BoC on Wednesday shaking out loonie bears from hibernation. The 40% drop in WTI since October’s MPR will likely be cause for a dovish slant in the report and in Poloz’s press conference following the rate statement, potentially pushing back the BoC’s expectation of when the output gap will be closed and excess slack is fully absorbed. While we believe Poloz will stop short of hinting at rate cuts given the transitory nature of the inflation outlook due to falling energy prices, we feel the overall tone will be less optimistic than in October, with weak oil prices and slugging global growth key headwinds for the Canadian economy in the short-term. USDCAD is back to flirting with a sustained break of the 1.20 handle this morning, finding no help from Canadian Manufacturing Sales numbers in November that slumped by 1.4%, lower than the -0.7% that had been expected, and an acceleration from the -1.1% recorded in October. Further reading: 7 Scenarios for the ECB decision All brokers should forgive negative balances Scott Smith Scott Smith Scott Smith is a Senior Corporate Foreign Exchange Trader with Cambridge Mercantile Group and has a diverse background in the foreign exchange industry, with previous experience in both credit and trading related functions. Scott holds a Bachelor of Commerce degree from the University of Victoria, has completed all three levels of the Chartered Financial Analyst designation, and is currently working towards the Derivative Market Specialist certification offered through the Canadian Securities Institute. Cambridge Mercantile Group. View All Post By Scott Smith Forex News Today: Daily Trading News share Read Next USD/CAD flirts with 1.21 on weak Canadian data, stronger Yohay Elam 7 years As traders in the United States return to their desks after yesterday's bank holiday, there is a semblance of calming optimism that is permeating through financial markets. With the Bank of Japan, Bank of Canada, and European Central Bank all set to hold policy decisions this week, this is likely the calm before the storm, as all three major central banks are expected to strike progressively more dovish tones at their respective meetings, widening the divergence in monetary policy trajectory between the United States and the rest of the developed world. 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