Forex headlines for March 18, 2014:
- BOC’s Poloz says Q1 growth to be on the soft side
- Poloz says will have to rethink policy stance if downside risks to inflation increase
- Canadian finance minister announces resignation
- BOE’s Carney says macroprudential tools reduce need for rate rises
- February US CPI 1.1% vs 1.2% exp y/y
- US counters Russia’s annexation of Crimea with promise to hold a meeting
- EU and US Russian sanctions to converge in coming days – US Treasury
- US housing starts Feb m/m +0.91mln vs +0.91 mln exp
- January Canadian manufacturing sales 1.5% vs 0.6% exp m/m
- Russia suspended from G8 – French foreign minister (Merkel disagrees)
- Russia storms military bases in Crimea
- Russian militias kill soldier, Ukraine authorizes use of live ammo for defense
- Ukraine acting PM says conflict in Crimea has moved from political to military stage
- WTI crude up $1.47 to $99.56
- Gold down $11 to $1356
- S&P 500 up 13 points to 1872
- NZD leads, CAD lags
Russia’s official annexation of Crimea wasn’t a surprise and once again markets were waiting to see how the West would respond. Once again, it was limp. The White House said its G7 allies will meet next week to discuss it. There is other talk of a response but it’s now highly unlikely to be anything that threatens the Russian economy or risks repercussions from the Kremlin. Markets breathed a sign of relief, especially stocks, which rallied strongly for the second day.
Given the news, you would expect better from USD/JPY but it didn’t perform. A spike higher to 101.79 on Putin’s calming words slowly faded and the key 101.20 zone was tested again in the afternoon. The low was 101.28. There are lots of keys (and trades) on that level.
The Canadian dollar was the focus of the later part of the session. The commodity currencies were roaring in early trading and USD/CAD hit some stops below 1.1040 down to 1.1026 — a one week low. The drop evaporated quickly but then Poloz sideswiped the market, first with the warning on CPI and growth and then with the rate cut talk. Later, Flaherty’s resignation didn’t have a large effect. Overall, the size of the move probably outstripped the magnitude of the news but it shows how disdainful the market is of the loonie.
The Aussie was flying high and took out the 2014 high of 0.9166 0.9133. The upside was capped by the 200-dma at 0.9149.
The kiwi was on a one-way rip higher, climbing a half-cent on the day to as high as 0.8640 — the highest since April 2013.
The euro was volatile. It hit the session high of 1.3943 in early US trading and then slumped down to 1.3880 after shots were fired in the Ukraine. As the situation calmed, it’s begun to climb again. Last at 1.3932.
Carney’s comments weren’t a factor for the pound (if anything, they were dovish). Before he spoke, the market took a run at stops and cable broke down to the lowest in a month at 1.6546. Impressively, GBP/USD has climbed back to 1.6588 for no particular reason.