Action Insight

The BOC left the policy rate unchanged at 1% in December. While acknowledging the strength in the employment situation, it warned of the slack in the labor market. While upgrading GDP growth forecast, it noted that it does not necessarily imply a narrower output gap. While admitting the policy rate would have to increase over time, it reiterated caution over any monetary decision. All in all, the central bank attempted to deliver a neutral to dovish message, so as not to cripple the recovery path – a lesson learnt after two consecutive rate hikes in July and September. Canadian dollar plunged after the announcement, with USDCAD jumping to as high as 1.2777, highest level in three days.

Dollar continues to trade with a mixed today as economic data released from US provide little inspiration. Sterling weakness remains the main theme in rather directionless markets. Misalignment within UK politicians remain the key issue in Brexit negotiation and Prime Minister Theresa is still struggling to put things back under control. Meanwhile, Australian Dollar stays as the second weakest one after today's GDP mixed. On other hand, Yen is extending its rebound, in particular against Europeans. Canada Dollar follow closely as markets await BoC rate decision. The Loonie would be given a boost if BoC signals that it's back in tightening path again.

The direction in the forex markets isn't too clear for the moment. Dollar firmed up mildly overnight and is maintaining broad based gains over the week. But there is clearly no follow through momentum while USD/JPY has indeed dipped notably in Asian session. Sterling continues to stay soft on Brexit dead lock but than the sellers are refusing to jump in yet. There are still hopes of a breakthrough in Brexit negotiation by the end of the week. Meanwhile, Aussie tumbles broadly today after GDP missed expectation and showed very weak consumption. BoC rate decision is the biggest feature today but could be a non-event. Instead, ADP job data from US could sparkle some moves in the greenback.

Sterling remains the weakest major currency today as traders are awaiting progress in Brexit negotiation. It probably takes a few more days for UK Prime Minister Theresa May to sort things out before she goes back to Brussels. Dollar regains some ground against Europeans and Yen. But commodity currencies are the ones who're shining today. In particular USD/CAD drops through 1.2665 support and is heading to 1.2598 key near term support level.

RBA left the cash rate unchanged at 1.5% in November, following the last reduction in August 2016. The accompanying statement contained little surprise. While staying confident over the employment situation, policymakers remained weary off the persistently soft inflation and wage growth. The RBA stance is largely unchanged from the previous meeting. We retain the view that the policy rate would stay unchanged for the entire 2018.

Sterling reversed earlier gains and weakened broadly overnight after the meeting between UK Prime Minister Theresa May and European Commission President Jean Claude Juncker failed deliver agreements on Brexit. Dollar also softened mildly as boost from tax bill faded. Traders are also cautious as there are still much work to be done to reconcile the House and Senate tax bills. And there are still lots of uncertainties on what the final versions would be. Investors in other markets were also cautious. DOW jumped to record high at 24534.04, but pared back much gain to close at 24290.05, up only 0.24%. S&P 500 rose to record high at 2665.19 too, but closed down -0.11% at 2639.44. Asian markets also trade with an undertone today with Nikkei losing -0.15% at the time of writing.

Sterling and Dollar remain the two strongest currencies today. The Pound surges further as boosted by comments from European Parliament's chief Brexit negotiator Guy Verhofstadt that there is a 50/50 chance of making "sufficient progress" today. Dollar, on the other hand, is firmly supported by optimism on getting the tax bill done before end of the year. Swiss Franc and Yen are trading broadly lower as risk appetites return. At the time of writing, DAX is trading up 1.4%, CAC up 1.0%. US futures point to sharply higher over as DOW will likely extend the record run.

Dollar opens the week generally higher as boosted by news that Senate has finally passed their tax bill. But strength is relatively limited firstly on concern that Russian probe is getting closer to President Donald Trump. Secondly, there are talks that the final version of the tax bill would just give very little lift to the economy. Sterling is also cautious bullish on optimism over Brexit negotiation. Swiss Franc and Japanese Yen are trading as the weakest one today. Looking ahead, the week is jam-packed with RBA and BoC meeting, plus many heavy weight economic data including non-farm payrolls.

Dollar took a back seat last week as traders were cautious ahead of the Senate's vote on the tax bill. Sterling took lead instead as boosted by positive Brexit news, as UK and EU seemed to have agreed on the divorce bill and Irish border. Canadian Dollar followed as the second strongest as stellar employment data raised the chance of more BoC hike next year. Meanwhile, Yen ended as the weakest one. It's followed by Euro, despite solid Eurozone data. Now, with the tax bill finally passed in Senate on Saturday, the greenback would likely come back to spotlight this week, with non-farm payroll also featured.

Canadian Dollar rebound strongly in early US session after stellar economic data. The employment market grew 79.5k in November, more than double of prior month's 35.3k and was well above expectation of 10k. Unemployment rate also dropped to 5.9%, down from 6.3%, way below expectation of 5.9%. USD/CAD reached as high as 1.2908 yesterday on Dollar strength. But the current sharp fall and break of 1.2804 support suggests rejection from 1.2916 key resistance. And consolidation from there is extending with another decline, possibly back to 1.2665 support. Also from Canada, GDP grew 0.2% mom in September, above expectation of 0.1% mom.

The Caixin manufacturing PMI for China slipped to 50.8 in November, from 51 in October. The reading also missed expectations of 51. Looking into the details, production and new orders increased at modest rates, while purchasing costs rose sharply. However, confidence towards the business outlook dropped to joint-lowest on record. As the agency noted, the manufacturing sector remained stable for most of November, despite 'some signs of weakness'. It forecast that the economy would remain stable for 4Q17. While growth should improve this year, when compared with 2016, it should decelerate in 2018. By contrast, the official manufacturing PMI rose +0.2 point to 51.8 in November this also beat expectations of a drop to 51.5. Non- manufacturing PMI increased +0.5 point to 54.8 last month. Divergence between official and private PMIs is nothing new. Part of the reason for the divergence is that the official data focus on large enterprises, while Caixin's focus on SMEs. This interpretation appears contradicting this month. Indeed, the official report suggests that SME PMI improved, while that for large companies slipped -0.2 point to 52.9 in November.

US stocks were once again boosted by optimism on Senate passing the tax bill. DOW gained 331.67 pts or 1.39% to close at 24272.35. S&P 500 rose 21.51 pts or 0.82% to end at 2647.58. Both were at record highs. NASDAQ lagged behind but still gained 49.58 pts or 0.73%. Though, Asian markets don't follow and are trading mixed at the time of writing. It should also be pointed out that treasury yield also staged strong rally. 10 year yield closed up 0.041 at 2.417 and looks very safe from key near term support at 2.273. More positive news on tax bill could push 10 year yield through near term resistance at 2.475, which will give support to Dollar, in particular USD/JPY.

Dollar stays firm in early US session, except versus Sterling and Euro. Forex traders are turning a bit cautious as economic data from US provide little inspiration. Focus will turn to the Republican's tax plan debate and vote in Senate. Meanwhile, Euro reversed earlier dip on disappointing inflation data as buyers emerged. Sterling, on the other hand, remains the start performer this week as more positive Brexit news come out. In other markets, WTI crude oil recover mildly and is back above 57.7 after OPEC agrees to extend production cut. Gold, on the other handle is pressured and breaches 1280 handle. Stocks traders are still partying with DOW futures pointing to another record high today.

The latest testimonies of both the incoming and outgoing Fed chairs suggest that the FOMC's approach would be more the less the same after February next year. At his confirmation hearing before the Senate, Jerome Powell affirmed that future monetary policy would remain data-dependent. He also added that...

Sterling and Dollar remain the two strongest currencies for the week. The greenback was supported by better than expected GDP data overnight, as well as Fed Chair Janet Yellen's upbeat comments. Positive sentiments in the US also sent DOW to record high at 23940.68, up 103.97 pts or 0.44%. NASDAQ, though, dropped -1.27% as investors dumped tech for bank stocks. That was in response to Fed Chair nominee Jerome Powell's hints on easing regulations. An important development to note is the rebound in treasury yields. 10 year yield closed up 0.038 at 2.376, keeping the near term bullish trend. The focus will now turn to Senate tax plan vote and PCE inflation data from US today.

Dollar's rally gathers momentum in early US session. Q3 GDP growth was revised higher to 3.3% annualized, up from 3.0% annualized and beat expectation of 3.2% annualized. The 3.3% annualized growth was the fastest in three years. More importantly, US growth has topped 3% for two quarters in a row. Considering the current momentum, it's possibly that the economy will make it three for the first time since 2004/5. There is little doubt that Fed will raise interest rate again in December. Solid growth momentum will most likely push wage and inflation and ease some Fed doves' concerns. Senate Republican's tax bill has already passed the Budget Committee and could be put to floor vote on Thursday.

US equities staged a strong rally overnight. Investors were happy that another step was taken with the Republican's tax plan. Senate version was approved by the Budget Committee, paving the way for a floor vote on Thursday. Also, Fed chair nominee Jerome Powell commented that current banking regulations are "tough enough". And there could even be some easing also lifted sentiments. DOW closed up 255.93 pts or 1.09% at 23826.71. S&P 500 gained 25.62 pts or 0.98% at 2627.04. NASDAQ also rose 33.84 pts or 0.49% to 6912.36. All three indices closed at record highs. Dollar rebounded broadly but was overwhelmed by Sterling. The Pound was given a strong boost on reports that UK and EU have agreed on the divorce bill.

Dollar recovers broadly today as it's digesting recent losses. Also there is some support from OECD report that projects acceleration in US growth next year. Focus will turn to Fed chair nominee Jerome Powell's confirmation hearing. But Powell is generally seen as a safe choice for the job and shouldn't give us surprises. While the greenback recovers, momentum remains unconvincing as trader stays cautious ahead of Senate vote on tax bill later in the week. Elsewhere, Aussie and Kiwi are both trading as the strongest one today while Sterling is back under broad based pressure.

Trading remains rather quiet in the forex markets this week so far. Dollar was supported by upbeat comments from Fed officials regarding a new term rate hike. Jerome Powell also indicated that he preferred continuity when taking over the Fed chair job. But Dollar traders stay cautiously watching...

There isn't a clear new direction in the forex markets today. Euro remains firm against as supported by economic outlook, and improving political situation in Germany. But the common currency is out-performed by commodity currencies. On the other hand, Dollar's recovery quickly lost momentum, with EUR/USD continuing to gyrate higher. The greenback is only performing slightly better than Swiss Franc, which trades as the weakest one so far. Overall, trading is rather quiet. Traders are holding their bets ahead of inflation data from US, Eurozone and Japan. Also, the development with US Senate tax bill and Germany coalition talks, as well as Brexit negotiations will also be the drivers later in the week.