Home Loonie Leaps Higher

The Canadian dollar is trading at its highest levels in more than three months following yesterday’s Bank of Canada policy meeting. Chairman Poloz and company took a more hawkish turn with this quarter’s Monetary Policy Report as the market keyed in on comments that the recent oil shock would dissolve sometime in the second half of 2015. The Central Bank also upgraded local growth forecasts and pinned its fortunes to those of the US economy, which is expected to expand over the next few quarters. It remains to be seen whether or not this rally will be sustained though, as the central bank noted the importance of “non-energy exports.” Mr. Poloz noted this sector will play a large role in 2015 as demand remains high amid a weaker currency with especially strong demand from the US. Another rate cut is not out of the question this year.

Overseas, the euro has jumped more than 1% since yesterday’s ECB press conference, as Mr. Draghi and company pledged to fulfill its 1 trillion-euro bond buying program. Despite a confetti protest, the European Central Bank explained that its QE program would continue amid recent economic “green shoots”, pushing yields to all-time lows and moving the euro to its level in over a week. While economic data remains limited this week, Greece remains the big news story for markets. In spite of an FT story reporting Greece had to be restrained from asking a delay in repayments, the euro is on the rise this morning. European Commissioner Dombrovskis made comments earlier today that he expects an upward revision of EU growth forecasts, as mainland Europe continues to heal.

As the Canadian dollar and euro ruled Wednesday, the Aussie rules Thursday moving higher on stronger than expected Australian employment numbers. The Aussie has jumped 1.5% after it was reported that their economy created 37.7k new jobs for the month of March, 31k coming by the way of full-time employment. To put into perspective, a number such as this is the equivalent of the US economy adding over 500k new jobs in one month. Trading at its highest levels in a month, these employment numbers seem to have reduced the odds of an interest rate cut in the next few months. There was also some optimism coming out of New Zealand as Finance Minister English had stated the Kiwis have been able to ride through a period of low dairy prices, positioning the NZD/USD rate 2.5% above Monday’sopening price.

Finally, looking to the US, all eyes will be on a slew of speeches from policy makers this afternoon. Fed members Lockhart, Fischer, Mester and Rosengren all speak after lunch today and the market will be poised to listen as Mr. Lockhart and Mr. Fischer are voting members in 2015. The US dollar is experiencing another brief sell-off after another round of poor housing numbers. March housing starts missed expectations of 1.04 million with a 926k print and building permits were a touch lower as well, coming in at 1.039 million versus expectations of 1.08 million. Weekly jobless claims experienced a sharp tick higher to 294k, as more Americans than expected filed first time unemployment claims. Canada has the day off but the week is not over, as inflation and retail sales finish the week tomorrowmorning. The Loonie could experience another strong push into this week’s close should core inflation remain above the important 2% level, supporting Mr. Poloz’s decision on Wednesday.

Further reading:

US housing and jobs data falls short – USD extends falls

EUR/USD: Trading the University of Michigan Consumer Sentiment Index