The dynamics of the foreign exchange market today is calm and measured. Futures on US indices in defense after another upward jump on Wednesday, European markets are growing ahead of the update on the monetary policy of the ECB. Oil prices rolled back after an attempt to rise earlier this week.
Despite the lull, the demand for risk dominates market sentiment, as investors tend to run ahead, given the final removal of pandemic restrictions in asset prices.
Inflation data on Thursday are generally moderately positive. New Zealand and Great Britain were noted, Canada was disappointed.
Inflation in New Zealand has exceeded the forecast. NZD rose on the report, as the chances of early withdrawal of RBNZ stimuli increased. UK inflation data were generally positive, with production prices exceeding the forecast in March. Cost inflation will manifest itself in consumer inflation next month.
At yesterday’s meeting, the Bank of Canada unexpectedly reduced the volume of QE and hinted at an increase in rates in the second half of 2022. As a result, there was a collapse of USD / CAD from 1.2630 to 1.2500. The decision of the Bank of Canada was the first signal that the CBs of developed countries are beginning to think that it is time to leave the vicious circle of low rates. In fact, the “race” of individual CBs in the exit from the stimulus becomes the defining medium-term driver of the dynamics of major currency pairs.
Due to the unexpected decision of the BOC and the still unshakable position of the FRS on the withdrawal of credit incentives, the chances of further weakening of the USD / CAD are growing. The pair remained in the sloping corridor after the upper limit test on Wednesday: