Macro events & news for December 18, 2015

December 18, 2015

FX News Today

The big news in overnight trade revolves around the Bank of Japan. In a sign of some serious desperation, the BoJ has announced that it will start buying more Exchange Traded Funds (ETF’s) and extend the duration of the bonds it buys in its QQE program. The central bank also noted that it will start accepting foreign currency bonds and housing mortgage loans as collateral. The announcement sparked volatility in Japanese markets; before the BoJ announcement the Nikkei 225 was trading lower, however rallied higher on the news to end strongly up 2.7%. At the same time, the USDJPY spiked to around 100 pips to a 123.55 peak before tumbling to a 121.70 low.

European data calendar is pretty empty today; on tap we have the Eurozone current account. The EURUSD fell close to the two week lows of 1.0802, falling from session highs of 1.0913.

The excitement of the Fed rate hike has been absorbed, and the USD is now trading modestly lower against most other currencies, however, remains stronger for the week.

U.S. equities closed the session near lows after the earlier drop with the price of crude oil.

Later today watch for some price action around the CAD upon the release of the Canadian Core CPI.

Main Macro Events Today

JPY Monetary Policy Statement: The Bank of Japan kept its Monetary Base on hold; however a new program was announced which will see the BoJ purchasing additional ETF’s.

CAD Canada Wholesale: Analyst expect wholesale shipments, due today, to rise 0.5% in October (median after the 0.1% dip in September. This report is typically overlooked, but an as expected bounce would be supportive of a rebound in October GDP. Analyst expect GDP to rise 0.2% in October after the 0.5% plunge in September.

Canada CPI: CPI, due today, is expected to expand at a 1.4% y/y pace in November (median +1.5%), accelerating from the 1.0% rates in September and August. CPI is seen flat on a month comparable basis in November (median +0.1%) after rising 0.1% in October. Gas prices fell 1.5% in November compared to October, which is expected to weigh on month comparable CPI. The BoC’s core CPI index is seen falling 0.1% m/m in November after the 0.2% and 0.3% gains seen in August, September and October. Annual core CPI growth is expected to expand at a 2.2% y/y rate in November (median +2.3%) following the 2.1% growth clips in August, September and October. The expected core CPI figure would, of course, leave the measure above the BoC’s 2.0% midpoint. However, Governor Poloz has maintained that run-up is transitory and not reflective of a tightening in supply conditions. Hence, the November report will not threaten the Bank’s dovishly constructive tone or the view that ongoing accommodative policy is required to bring the economy back to full capacity growth.

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