HomeContributorsFundamental AnalysisDraghi & Poloz Spin it Again

Draghi & Poloz Spin it Again

ECB president Draghi and BoC governor Poloz showdd their usual rhetorcial creativity on Thursday, prompting the euro to lose some ground and the loonie to regain momentum following last week’s rate announcement. Yen pushes higher after the Tankan manufacturing survey hit 11-year high. USD is down cross the board after on fresh roadblocks to US tax reform, this time from Senator Rubio. Up next is US industrial production and further chatter on the tax bills.

Draghi left the ECB’s forward guidance unchanged along with interest rates at this month’s rate decision. The staff boosted growth up to 2.3% next year from 1.8% while bumping 2019 to 1.9% from 1.7%. In spite of that, inflation forecasts were only nudged up to 1.4% next year from 1.2% and unchanged at 1.5% in 2019.

One of the major risks Draghi cited was the FX rate, keeping a lid on the currency. In the aftermath of the press conference, EURUSD remarkably slid to 1.1780 from 1.1850 in the face of rising sentiment and improving data.

On the flipside is BOC Governor Stephen Poloz continued to confound markets. 8 days after the CAD began a sharp descent following the central bank’s keeping of the term "caution" in its policy statement, Poloz entered into a discussion on what caution means, indicating it does not mean they will not hike again. He also added that the 50-bp rate hikes of the last 6 months were not expected to have a large effect on the ecomomy.

USD/CAD fell by 1205 pips to 1.2850 only to rebound to 1.2800 around the US close. It is now trading at 1.2750, sending the USDCAD short of the Premium Insights back into the green. Markets are now pricing a 62% chance of a hike in March but we struggle to see how either side could have any confidence at this point. Also note that Canadian oil is now trading at a $28 discount to WTI in a story that is underappreciated.

Ashraf Laidi
Ashraf Laidihttp://ashraflaidi.com/
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.

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