The New Zealand dollar is the biggest loser today, pushing the euro into second spot in the race to the bottom. The kiwi is off its lows but showing a loss of 1.0% versus the U.S. dollar, and slightly more against the Canadian dollar and sterling, which are the strongest currencies on the day so far out of the units we track. The kiwi was shorted following weekend elections that failed to produce a clear winner. NZDUSD hit a one-week low at 0.7251, since settling about 20 pips above here, while NZDCAD hit 0.8940 low. However, with BoC committed to grow the economy of Canada, and with Loonie still be in a strong weekly trend, despite the losses seen the last two weeks based on geopolitics, we anticipate CAD could get stronger. However a confirmation of the downtrend continuation can be given only with a break below 0.8900 level which is also close to 20-Day MA.
Bank of Canada Governor Poloz speaks this Wednesday, in his first outing since the rate hike on September 6. His speech follows Deputy Governor Lane’s speech this past Monday, who perhaps signaled a more gradualist approach to rate hikes ahead. Lane said the Bank is paying close attention to the impact of the stronger Canadian dollar and that possible changes to NAFTA are a key source of uncertainty for Canada’s outlook. Does this mean they are now less aggressive after the back to back 25 bp hikes in July and September? Possibly, but the loonie has seen a slight unwinding relative to the greenback since the Sep 8 announcement while the downside risk from NAFTA changes has been in play since last November’s U.S. election. Of course, mention of both those subjects (loonie, NAFTA) could be meaningful. Or not, as the BoC is not exactly providing step by step guidance as they take rates higher. Poloz’s speech, The Meaning of “Data Dependence”: An Economic Progress Report, is available Wednesday at 15:45 GMT, with a press conference to follow.
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