USDCAD breaks above 1.34 after dovish BOC; Oil mixed after large inventory build

Summary:

• CAD swoons after dovish BOC; USDCAD above 1.34

• USDTRY soars to 7-week high

• Crude Oil mixed after large inventory build

• ADP points to strong NFP; ECB leak hints at TLTROs

• Are we close to a major move in EURUSD

There’s been a pretty negative reaction in the Canadian dollar to the latest rate decision from the Bank of Canada (BOC), with the Loonie falling lower against all of its peers after what appears to be a clear dovish shift. As was almost unanimously expected the BOC kept rates unchanged at 1.75%, but in the absence of a press conference or financial projections the policy statement was always likely to provide the biggest market moving news and this is exactly what happened. USDCAD has rallied to its highest level since the start of the year following the dovish shift, taking out prior resistance around 1.3380 along the way

The Turkish lira is a big loser on Wednesday even though the central bank left interest rates unchanged. Traders are increasingly concerned about a renewing diplomatic rift between Turkey and the US and that leads to prices increases on USDTRY. The pair soars nearly 1% to 5.42 – the highest level since 16 January.

A large build in the weekly crude oil inventory figures has pared the large drop seen last time out, but with a couple of the components printing large draws the overall impact is hard to ascertain clearly and this can be seen in a mixed market reaction. The headline build of 7.1M looks negative for price on the face of it compared to a consensus forecast for +1.2M and erases the majority of the drawdown of 8.6M seen last week, but it is actually not far from Tuesday’s API  number (+7.3M). Oil.WTI is at a potentially pivotal point with support around 55.25 an obvious area of interest.

There are two big events in the coming days which could have a major impact on the EURUSD; with the ECB rate decision tomorrow before Friday’s NFP. In the past hour two fresh developments have gone some way to framing expectations heading into these with some solid US jobs data and leaked reports that the ECB is paving the way for more stimulus. The main event from the US this week is Friday’s NFP report, and the early indications suggest that it could well be another strong release. Coming just 48 hours before the NFP data, the ADP employment change is often seen as a harbinger of what’s to come and the signs are positive with a print of +183k for February. Of these 139k came from the service sector and the remaining from the goods sector. Turning our attention to the ECB and sources from the bank have been cited by Bloomberg making some interesting comments ahead of the rate decision Thursday at 12:45 (GMT). The ECB are said to announce a cut to their outlook by “enough to warrant new loans” which in other words means the bank will pave the way for further stimulus in the form of TLTROs.

The EURUSD currency pair has been trading in a narrow consolidation for quite some time. The 1.12-1.13 support zone has prevented declines but the euro has been unable to capitalise on it. With two big events coming this week – the ECB meeting on Thursday and the NFP report on Friday – are we close to a breakout? Read more here