Treading water

Wednesday morning we’re looking at fairly lackluster trades for the dollar. Ahead we have housing data to watch. While existing home sales aren’t typically a very big economic indicator, we’re watching it more closely than usual after Housing starts disappointed last week.

Commodity currencies continue to tread water as risk appetite recovered, boosting the Mexican peso and pushing the Japanese yen lower. Sterling is the strongest currency heading into the market open in New York.

GBP, the phoenix from the ashes

After being dealt a significant blow yesterday, sterling has almost completely recovered its losses. Contrary to Governor Carney’s pessimistic outlook, the Bank of England ‘s chief economist Andy Haldane took a more positive tone. Haldane said he considered voting for a rate hike last week, citing solid growth and diminished downside risks toward inflation.

Haldane’s hawkish comments are especially poignant given that he typically favors low interest rate policy.

The chief economist’s support of voting to raise rates “relatively soon” will fuel the perception of a split within the BoE. As inflation continues to climb, resurgent hopes of a rate hike may not be far off. This could drive a stronger pound in the near term if investors start to price that in.

Oil struggles to keep above water

A recovery in oil prices Wednesday morning was not enough to shore up the Canadian dollar. West Texas Intermediate clawed back from yesterday’s lows, but we aren’t likely to see a significant reversal to the upside anytime soon.

Global oversupply concerns persist, and geopolitical tensions are building in the Middle East. A surprise announcement from the world’s largest oil exporter isn’t having an immediate effect on oil prices, but will be an important development to keep an eye on. Saudi Arabia’s King Salman deposed the heir to the throne , naming his own son Crown Prince Mohammed bin Salman as next in line.

With little to incite optimism for oil, we expect CAD to remain under pressure in the near term.

EURUSD: Euro flat against the USD with little to drive price action on either side.

GBPUSD: Sterling looks practically giddy after the BoE’s chief economist said he is on board for raising interest rates sooner rather than later.

AUDUSD: Aussie dollar under pressure as commodities remain weak.

USDCAD: Canadian dollar lower as there is little in the way of optimism for oil prices.

USDJPY: Yen lower as investors take on more risk appetite this morning.