 The Bank of Canada, as expected, hiked rates by a quarter point to 0.75% in today’s meeting. The accompanying release, while saying economic activity in Canada was unfolding largely as expected, did cut its forecasts for growth in 2010 and 2011. Following the BOC decision, the USD/CAD tested its resistance for this week near the 1.0585 area, as the downgrade to growth assessment weakened the CAD. If the pair moved above this resistance, we can see an attempt to test the 1.0670 area. |
 The market brushed off a downgrade of Ireland by Moody’s as traders and investors look ahead to the release of Euro-zone bank stress tests. The 1.30 level held as resistance for the EUR/USD pair. The Bank of Canada meanwhile gets ready to raise rates by another quarter point tomorrow. |
 Global equities rallied as early 2nd quarter earnings were better-than-expected and Greece held a well received debt auction. That boosted risk appetite and helped “risk-on” trades as the Euro, Pound, and commodity currencies rallied against the greenback. We also take a look at UK releases and US and Canadian trade data. |
 The May US trade gap rose to a higher than expected $42.3 billion. That’s the highest deficit since November 2008. Both exports and imports increased modestly from their April levels. Exports grew 2.4% while imports were up 2.9%. |
 The Euro managed to rally against its rivals as a three-month tender by the ECB showed less than expected demand for loans from the bank. The Pound lost ground on end of the month flows while commodity currencies were weaker as a result of concerns about global growth and a weak US ADP employment report. |
 In a quiet session, the Euro retreated from its recent highs. Housing and government borrowing data from the UK was supporting of the Pound. Canada posted strong results as well helping it to break below its 1.0220 support. The Aussie gained on the back of a rise in gold to a record high. |
 Today’s session started with risk aversion as the risk premium on Spanish bonds rose on rumors that Spain may have to ask for aid from the EU or IMF. A positive report from the US manufacturing sector helped bring back risk appetite with “risk-on” trades paring overnight losses. In late NY trading the Pound slid sharply on BOE King’s comments regarding UK price inflation. |
 The dollar fell against most major currencies on Monday. Global recovery optimism rose after data showed eurozone April industrial production posted the largest year-on-year gain since records started in 1991. The yen reversed overnight losses. The S&P 500 reversed earlier gains and fell 1.97 to 1,089.63 after Moody’s Investors Service said it downgraded Greece’s government bond ratings by four levels to Ba1 from A3. |
 There was a slew of reports on the fundamental docket including strong Chinese trade data, a strong Australian jobs report and better thane expected Japanese GDP data. That helped set off some risk appetite in global markets. We had 3 central bank decision – from the RBNZ, BOE and ECB. In North America we saw US trade and jobless claims data as well as trade figures from Canada. |
Daily Video Recap: Euro Slides on Bank Stress Tests, BOC Raises Rates
Fundamental Updates \ Nick Nasad \ 12:12 PM EDT \ July 20th, 2010The Euro slid overnight after failing to move above the 1.30 level as traders digested reports that German lender Hypo Real Estate would need 2 billion euros in case of adverse circumstances. The BOC meanwhile, lifted rates to 0.75% but did so while painting a gloomier outlook for Canadian growth. US housing starts data came in weaker than expected.