No change at the Bank of Canada

3 minute read


On average the USD was unchanged against the other ten most actively-traded currencies in a day of relatively little movement. There was no softening of the trade war rhetoric, with a senior Chinese official accusing Washington of "naked economic terrorism". The comment built on a piece in the People's Daily newspaper yesterday, entitled "United States, don't underestimate China's ability to strike back". In a comment aimed at the White House it said "Don't say we didn't warn you!"

The eminently-forgettable US economic data covered retail sales and the Richmond Fed's manufacturing index. Johnson Redbook retail sales looked much the same in the week to 24 May as they had seven days earlier, with monthly and annual increases of 1.3% and 5.7%. The Richmond Fed's manufacturing index was two points higher at 5.


Overnight and through the morning the EUR drifted lower before coming to a halt after lunch. It stabilized in the afternoon and overnight, leaving the EUR a net 0.2% lower on the day against the USD. This morning's data from Spain showed inflation slowing to 0.9% and retail sales increasing by 1.1% in the year to April.

The European Commission is maintaining the pressure on Italy to sort out its public finances. It is concerned that Rome's non-compliance with EU budgetary constraints poses a threat to the union. If the Italian government fails to bow to Brussels' command it could, in theory face billions of euros in fines, though it is not obvious how an insolvent nation could come up with the money, and no such fine has ever been imposed. 


On the day the Loonie is unchanged against the USD. It movement had only a tenuous link to oil prices, as WTI crude added 1.7%. There were no Canadian economic data.

Only the Bank of Canada's rate announcement had any chance of enlivening the CAD's day. Sure enough it did so, but only for about ten minutes. As expected, the BoC kept its target for the overnight rate unchanged at 1.75% for an eighth month. The statement included no hint to future direction. 


There is still little sign of life in the British pound. It had another shiftless day on Wednesday, losing an average of 0.2% and giving up 0.2% to the USD. There were no UK economic data to bear the blame.

But neither was there any sign of progress on the political front. A week ago the "ruling" Conservative party awarded itself two-month break from the drudgery of Brexit in order to select a new leader to replace Theresa May. With the heavyweights busily canvassing for support, little else can be seen going on in Westminster.


Mainly for technical reasons the JPY lost ground over the last 24 hours. It is 0.4% lower against the USD. In the absence of obvious macroeconomic factors it looked as though investors were passing the time by returning the yen to the weaker side of the horizontal channel it has followed for the last week.

Three were no useful Japanese economic data overnight. Tonight will be a different matter, with more than a dozen ecostats.

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