• Slow and steady wins the race
  • Here come the doves
  • RBNZ holds on all fronts
  • WTI can’t take CAD with it

Good morning,

A slew of central bank headlines are keeping us busy this morning, starting with the Bank of England. They were more dovish than the market expected, with the internal debate on whether there should be a rate hike seemingly stalled. Kristin Forbes remained the sole dissenter calling for a rate hike and the Committee did not change the language on what it would take to justify less accommodation from a policy perspective. Governor Carney defended the bank’s current accommodative policy, saying “our stimulus isn’t excessive, it’s appropriate” during the Q&A. Those hoping for a more aggressive tone from the BoE were soundly quieted.

While the Bank of England may be unmoved, the European Central Bank may be gearing up for a change. ECB vice president Constancio told Reuters Thursday that the bank should make a decision on QE in the fall, but that maintaining looser policy for longer was the safe bet. His comments match those from ECB president Draghi who has defended running the bank’s substantial stimulus program until they are sure that the inflation outlook is stable. Although the euro took a hit on Constancio’s comments, it has recovered to sit flat against the USD this morning.

The Reserve Bank of New Zealand held interest rates, sending kiwi dollar plummeting – it’s down over a percent against the greenback this morning. While markets weren’t expecting any change to the cash rate at this meeting, the knee-jerk reaction came from the investors expecting the RBNZ to bring forward their projection of the next hike. These expectations were driven by stronger domestic data, including CPI inflation that beat expectations in Q1, but the RBNZ will likely err to the side of caution until a sustained trend of higher inflation emerges.

Oil is pushing up for a second day, with a barrel of West Texas Intermediate crude trading around $48 a barrel. Despite WTI’s move higher, the loonie isn’t seeing any of the benefits and sits lower against its US counterpart by about 0.5%. Other oil-linked currencies keeping the optimistic trade, with Russian ruble extending gains since Monday and Norwegian krone edging higher to gain on the USD for a second day in a row.

EURUSD: Euro flat against the greenback despite dovish comments from ECB VP Constancio.

GBPUSD: Sterling weaker after the BoE took the wind out of hawkish hopefuls by leaving the policy outlook unchanged.

AUDUSD: Aussie dollar firmed after being dragged down by New Zealand’s currency overnight.

USDCAD: Canadian dollar surprisingly weaker despite another move up in oil prices, looks to be trading on USD moves rather than its own drivers again.

USDJPY: The yen higher across the board as risk appetite scales back. The move could sharpen as the annual US “threats” report to the senate said that North Korea may test their first inter-continental missile as early as this year.