We observed very tight ranges in most currency pairs during the London morning. There was not enough direction coming from Ukraine or Black Sea news, and appetite to adjust or open new positions was understandably very low with so much near-term event risk just ahead.
The typical USDCAD ranges still dominate heading into the BoC later this morning: 1.110-1.115 is acting as a ceiling and 1.1025-1.105 is acting as a floor. As a consequence of our economists’ own views and their take on the dataflow, in FX Strategy we see limited opportunity for the BoC to stoke another sharp move lower in the CAD as early as today. However, the degree of CAD short covering heading into today appears to have been relatively small, especially in comparison to the shakeout we observed from early-mid February. This suggests that the FX market may, on balance, be holding out for the chance of tweaks that are mildly neutral-to-dovish in nature.
USDCAD downside should be contained since a ‘hawkish surprise’ today would be wholly counterproductive for the BoC. Therefore, a less upbeat assessment of US conditions from the BoC is really the main hope we have of seeing a brief kneejerk higher into the 1.1125-1.1150 range. This would be before the pair settles back into the upper 1.100s heading into the close, which is our baseline view in FX Strategy.
Read the full report: FX Daily
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