Yesterday the Bank of Canada convened and the result of which was to drop the base rate in the country from 0.75% to 0.50%. This is the second easing of monetary policy for the past year. Simultaneously, the regulator emphasized that there is still room for further monetary stimulus since the slowing down of the global economy (which has been mostly caused bt a fall in oil prices) has harmed Canada’s export base and, in turn, the country’s GDP figures. Additional stimulative measures will be required to boost the economy to the required level and for inflation to reach target levels.
Earlier on Wednesday the Canadian dollar was up on the back of supply data in Canada’s manufacturing sector which showed that the May version of the indicator which takes into account seasonal fluctuations increased by 0.1%; 0.3% less than the expected growth. June housing sales in Canada fell by 0.8% in comparison with May, whilst prices shot up by 9.8%.
After the news from the regulator, the Canadian dollar weakened against its American counterpart, dropping to a six-year minimum: the pair passed 1.2735 to 1.2943. In the coming weeks, the American/Canadian is very likely to break the 1.30 mark.
The US Fed’s Janet Yellen once again affirmed that the reserve intends to raise their short term base rate in 2015 if the economy develops in line with expectations.
The Greek parliament approved the economic measures that were put to it by its Eurozone creditors. Votes from parliament show that 229 of 300 parliamentarians supported the measures. 32 of the 149 SYRIZA MPs voted against approval of the agreement, six abstained and one was absent. The new fractures in the Greek parliament were clear to see earlier on. Tsipras needs to form a coalition or call early elections. The measures to be put in place will lead to economic contraction and a reduction in spending of 9 billion euros, whilst also including a rise in taxes over the coming three years.
Eurozone finance ministers have agreed to expand the credit line which Greece will receive to 7 billion euros in response to parliament’s approval of the reform implementation. The details will become clearer tomorrow.
According to data published today, inflation in New Zealand has hastened slightly, but still remains short of the target 1-3% target zone set by the country’s central bank. This is due to the fact that fuel and air travel costs remain significantly below the levels that they were at last year. The country’s CPI in Q2 grew by 0.3% in comparison with the same period last year. Last quarter’s CPI had grown by just 0.1% YOY. QOQ values for the index show a Q2 rise of 0.4%. This is the first quarterly growth in the index since the penultimate quarter of 2014.
The New Zealander/Yankee pair was down to 0.6496, but later gained ground back.
According to the statistics, the Eurozone has seen a balance of trade surplus in May when we take into account seasonal factors. The surplus amounted to 21.2 billion euros. In April this figure was 23.9 billion. MOM export volumes were down 1.5% and import figures are more or less unchanged. Nevertheless, without taking into account the seasonal factors, the indicator rose to 18.8 billion from May 2014’s 14.7 billion. Judging by the look of it, the euro’s weakening still hasn’t facilitated a continued growth for the region.
June’s YOY inflation rate in the Eurozone reached 0.2% against May’s 0.3%. These numbers fit with preliminary values from 30th June. The medium term inflation rate set by the ECB is 2%. Without taking fuel, food, alcohol and tobacco into account, inflation slowed and as a YOY value for June stood at 0.8% against May’s 0.9%.
Another ECB meeting took place in which it was decided that monetary policy would be left unchanged. It’s worth listening to what Mario Draghi has to say at a Eurozone press conference in which he is due to comment on the current Eurozone economy, including a mention of Greece and prospective inflation values. The euro/dollar is trading down at 1.0888. Further movements on the pair will be dictated by speeches from Yellen and Draghi.
Today it’s worth having a look at the number of initial unemployment benefit applications and the Philadelphia Fed’s manufacturing index. The Bank of England’s governor, Mark Carney is due to give a speech and the US Fed’s Janet Yellen is going to speak before Congress.
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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.
Director of Alpari's analytical department
## ojimadu position
Senior Alpari analyst
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