Yesterday, the IMF cut its global growth forecast for 2016 from 3.6% to 3.4%, citing a slowdown in China and a rout in commodity prices as the main culprit for the downgrade. Additionally, the organization stated that rising interest rates in the US may act as a potential risk to global growth. The report caused oil prices to retreat from their yesterday's highs, triggering USDCAD to close positive after spending most of the day in negative territory. Furthermore, USDCAD formed a new multi year intra-day high this morning - currently trading at 1.4650 at the time of writing, as oil prices are down over 3%. Elsewhere, yesterday’s beat on inflation data from the UK was not enough to resurrect the falling Pound, as Mark Carney stated shortly after the economic data release that this is not the time to raise interest rates – causing GBPUSD to fall 0.5% on the day, which is also a 7-year low, after being up nearly 0.7% for a short period. The UK is scheduled to release employment data, including average earnings and claimant count change figures. Despite the labour market tightening in the UK, earnings are expected to have fallen once again. Next, the US will publish inflation figures, with the headline number expected to remain unchanged at 0%, though the risk remains to the downside due to falling energy prices. Last but not least, the Bank of Canada is widely expected to cut its interest rate by 0.25% at its meeting later this evening. Fears of a contracting economy, as energy prices continue to fall, is the main reason for the expectations amongst economists, while the options markets are currently pricing in a 60% chance of a rate-cut. On the contrary, if the BoC does decide not to cut, a sharp relief rally could be seen in all CAD crosses. |
