Canadian Dollar Falls On Risk Aversion, BoC Rate Cut Worries
January 18 2017 - 11:38PM
RTTF2
The Canadian dollar declined against its key counterparts in the
early European session on Thursday, in response to the Bank of
Canada Governor Stephen Poloz's warning over an interest rate cut,
citing considerable uncertainty surrounding the protectionist
policies proposed by the U.S. President-elect Donald Trump.
Speaking to reporters in Ottawa post-BoC decision on Wednesday,
Poloz said that an interest rate cut "remains on the table," as the
economy is bracing a "protectionist tilt" in the U.S., which would
have "material consequences for Canadian investment and
exports."
Poloz said the bank is "particularly concerned about the
ramifications of U.S. trade policy, because it is so fundamental to
the Canadian economy."
"Should any of those downside risks materialize and put our
inflation target at risk, then we would have the room to
manoeuvre," he added.
Further undermining the currency was risk aversion, with
investors turning cautious ahead of the European Central Bank
monetary policy decision later in the day and the inauguration of
Donald Trump as President on Friday.
Caution prevailed over the fiscal policies proposed by Trump and
the potential difficulties in its implementation when he takes
charge.
The loonie showed mixed trading in the Asian session. While the
loonie held steady against the greenback and the euro, it rose
against the yen. Against the aussie, it declined.
The loonie fell to an 8-day low of 1.3287 against the greenback,
compared to Wednesday's closing value of 1.3269. The loonie is seen
finding support around the 1.335 region.
The loonie that closed Wednesday's trading at 1.4104 against the
euro and 0.9958 against the aussie fell to near a 3-week low of
1.4165 and near a 2-month low of 1.0046, respectively. The next
possible support for the loonie may be found around 1.43 against
the euro and 1.01 against the aussie.
The loonie pared gains to 86.16 against the Japanese yen, from a
high of 86.62 hit at 8:15 pm ET. If the loonie extends slide, 85.00
is likely seen as its next support level.
Looking ahead, the European Central bank will announce its
interest rate decision at 7:45 am ET. The economists expect the
central bank's deposit rate and refinancing rate to remain stable
at -0.4 percent and 0 Percent, respectively.
Following the announcement, European Central Bank President
Mario Draghi will hold the customary post-meeting press conference
at 8:30 am ET.
In the New York session, U.S. building permits and housing
starts for December, U.S. weekly jobless claims for the week ended
January 14, Federal Reserve Bank of Philadelphia manufacturing
index for January, U.S. crude oil inventories data and Canada
manufacturing sales data for November are set to be published.
At 3:45 pm ET, San Francisco Fed President John Williams is
expected to speak before the Solano Economic Development
Corporation Annual Luncheon Meeting, Fairfield, United States.
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