Late in the day yesterday, rumours surfaced that U.S. President Donald Trump was considering naming Jerome Powell to replace Janet Yellen as Chair of the U.S. Federal Reserve, which shook up the currency market somewhat, as illustrated by the sudden gains in the euro and yen against the greenback.
This movement can be attributed to the fact that Powell thinks along similar lines as Ms. Yellen regarding monetary policy. In short, such an appointment would mean continuity rather than a more hawkish monetary policy. Some observers may say that this explanation for currency movements is somewhat far-fetched, but it certainly illustrates the influence that central banks have on markets.
This morning, we’ll be keeping an eye on two major economic indicators in Canada, namely Retail Sales and inflation. In a context in which several central banks, including the Bank of Canada, appear to be waiting for a rebound in inflation to tighten their monetary policy, this morning’s reading takes on a singular importance. A disappointing showing could lead to a quick drop in our currency against the greenback.
Have a great day! Julien Duquette
Range of the day: 1.2390 – 1.2600
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