Bank Of Canada On Hold | ForexGen

Posted by forexgentabloid | 4 Sep, 2008, 11:19

Commodity-price swings will continue to trigger further volatility in the currency, but the Canadian dollar will struggle to extend the near-term recovery beyond the 1.05 level.
The Canadian dollar weakened to lows around 1.0770 against the US dollar ahead of the Bank of Canada interest rate decision on Wednesday which was a 12-month low for the Canadian unit.
There had been some speculation over a cut in rates which pushed the currency weaker, but the bank left rates on hold at 3.0%. The bank also indicated that it was comfortable with the current accommodative stance and suggested that rates would not be cut in the near term. The Finance Ministry was also generally optimistic over the Canadian fundamentals
Following the decision, there was a sharp short-covering rally for the currency which pushed the Canadian dollar stronger to highs beyond the 1.06 level against the US dollar. The Canadian currency retained a firm tone on Thursday with a move towards 1.0550 as the US currency retained a more defensive tone.

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BOE TO LEAVE RATES UNCHANGED, UK FIRMS ON FIRE SALE | ForexGen

Posted by forexgentabloid | 4 Sep, 2008, 11:11

The British pound continued to sell off despite an improvement in service sector PMI.The UK economy is weak, but it is encouraging that manufacturing, construction and service sector PMI all improved in the month of August.This suggests that even though growth is continuing to contract, the pace of deterioration may be slowing.


Consumer confidence remains at a 4 year low, but the recent decline in the British pound and the drop in oil prices should help to boost growth.The 12 percent decline in the British pound has put UK firms on a fire sale.We expect M&A activity to pick up, which could help to temporarily stabilize the currency.
The Bank of England is expected to leave interest rates unchanged at 5.00 percent.With the economy slowing and inflationary pressures easing, the next move by the central bank should be a rate cut.The market is currently pricing in 75bp of easing over the next 12 months and because of that, we still expect the GBP/USD to break 1.75.Usually when the BoE leaves rates unchanged, no statement is released, which mean that the action should be in the EUR/USD tomorrow on the heels of Trichet's press conference.

General, British pound, currency, economy, interest rates, service | Comments (0) | Trackbacks (0)