As I talked about yesterday, one of the factors that has been crushing FX volatility recently has been the removal of near-term rate move expectations, principally from the Fed, but also from other central banks. We’re going to have more indication on this over the next couple of days with the Bank of Canada decision today and the ECB tomorrow. Overnight, we’ve also seen the Reserve Bank of Australia strike a relatively bullish tone in their latest set of minutes, which gave some further legs to the Aussie rally. There are some residual thoughts of one further easing, but this is looking less likely at the present moment in time.
Looking to today’s decision from the BoC, recall that they have cut rates twice this year, being one of the first to cut rates during the global easing phase earlier in the year, anticipating the weakness in the economy in the first half of the year. There have been signs of recovery since then, so the focus today is more with the accompanying statement, rather than chance of a cut in rates, which looks pretty slim. The ECB was also sounding more confident yesterday in its latest Bank Lending Survey, which suggested that QE was having an effect. Today’s data releases are going to take a back seat in relation to the central bank events. EURJPY continues to look the most interesting cross for the time being, having bounced off trendline support for the past several days, which comes in at 135.34 today.