Back
1 Jan 1970
All eyes on Fedspeak today - BMO
FXStreet (Barcelona) -Stephen Gallo, European Head of Currency Strategy at BMO Capital, underlines the relevance of tonight's Fedspeak.
Key Quotes
"It appeared as if a combination of short-term profit taking and ‘risk on’ weighed on USD demand this morning, as key sovereign rate differentials have not materially backed off against the USD yet. We still have important US data to get through over the coming few weeks, and the outcome of that data will be a crucial factor in determining whether the firmer tones in yields and the USD can extend themselves."
"The most immediate risk to be mindful of, however, is the today’s Fed speak. 1.385 and 1.655 in EURUSD and GBUSD respectively will come into play quickly if these remarks seek to offset some of the impact of the FOMC on Wednesday."
"Our economists are looking for a stronger-than-consensus read on ex-auto retail sales (1.1%) and an in-line reading on headline CPI (1.0%). The combination of Poloz on Tuesday and the FOMC on Wednesday probably have the short-term CAD market biased moderately net short heading into the data."
"USDCAD shouldn’t be too vulnerable to a sharp correction lower on in-line or slightly firmer data, however, mainly because the 5yr swap rate differential has driven the CAD in this latest move, and not the other way around. On that metric, we’re not too far off short-term fair value at this point, so 1.119-1.122 should provide good support."
"However, what will compound an in-line or better result in the data is ‘dovish’ Fed speak, and that could set us up for a weekly close in the 1.115-1.120 range. Our hunch is that the consensus is looking for today’s Fed speak to ‘soothe’ some of the fears instigated by Wednesday’s FOMC, so we’d be cautious about buying USDCAD 1.122-1.125 if the data are on the better side."
"The session was fairly quiet overnight in Asia following a pretty tumultuous week before today. PBoC fixed the onshore mid-point just 15 pips higher (6.1475), and that modest rise in the fix and intervention flow during the day appeared to be partially related to the approach of the 6.210 level in USDCNH."
"The pair briefly broke above that level but then traded back down. Onshore CNY is still trading 200-250 pips above the old upper band, so PBoC continues to make use of the new, wider band on the weak side, and we don’t think that will change materially as the new week starts."
"Wed would stay very cautious at the start of next week, but two successive neutral-to-lower fixings will start to shift near-term expectations away from a move to 6.250 in USDCNY. Having said that, one strategy of PBoC at this stage may be to keep participants negatively exposed to CNY downside on their toes without inflicting significantly more pain."
Key Quotes
"It appeared as if a combination of short-term profit taking and ‘risk on’ weighed on USD demand this morning, as key sovereign rate differentials have not materially backed off against the USD yet. We still have important US data to get through over the coming few weeks, and the outcome of that data will be a crucial factor in determining whether the firmer tones in yields and the USD can extend themselves."
"The most immediate risk to be mindful of, however, is the today’s Fed speak. 1.385 and 1.655 in EURUSD and GBUSD respectively will come into play quickly if these remarks seek to offset some of the impact of the FOMC on Wednesday."
"Our economists are looking for a stronger-than-consensus read on ex-auto retail sales (1.1%) and an in-line reading on headline CPI (1.0%). The combination of Poloz on Tuesday and the FOMC on Wednesday probably have the short-term CAD market biased moderately net short heading into the data."
"USDCAD shouldn’t be too vulnerable to a sharp correction lower on in-line or slightly firmer data, however, mainly because the 5yr swap rate differential has driven the CAD in this latest move, and not the other way around. On that metric, we’re not too far off short-term fair value at this point, so 1.119-1.122 should provide good support."
"However, what will compound an in-line or better result in the data is ‘dovish’ Fed speak, and that could set us up for a weekly close in the 1.115-1.120 range. Our hunch is that the consensus is looking for today’s Fed speak to ‘soothe’ some of the fears instigated by Wednesday’s FOMC, so we’d be cautious about buying USDCAD 1.122-1.125 if the data are on the better side."
"The session was fairly quiet overnight in Asia following a pretty tumultuous week before today. PBoC fixed the onshore mid-point just 15 pips higher (6.1475), and that modest rise in the fix and intervention flow during the day appeared to be partially related to the approach of the 6.210 level in USDCNH."
"The pair briefly broke above that level but then traded back down. Onshore CNY is still trading 200-250 pips above the old upper band, so PBoC continues to make use of the new, wider band on the weak side, and we don’t think that will change materially as the new week starts."
"Wed would stay very cautious at the start of next week, but two successive neutral-to-lower fixings will start to shift near-term expectations away from a move to 6.250 in USDCNY. Having said that, one strategy of PBoC at this stage may be to keep participants negatively exposed to CNY downside on their toes without inflicting significantly more pain."