Today’s ECB(European central bank) meeting left interest rates unchanged at 0.0% , The move was widely expected , dollor bulls were in control before ECB Conference but as soon as Mario Draghi (ECB Head) said “possibility of increasing the asset-purchase program if the outlook becomes less favorable” in policy statement , traders took it negative and push Euro back to 1.23 handle. The Drop of 150 pips in single trading session , leaves the euro back into woods. A better than expected U.S NON FARM PAYROLL report can push it further to 1.20 (psychological level). However a negative report may not able to pull it back to 1.24 but pair could go into ranging. The central bank also lowered its 2019 inflation forecast with Draghi warning that underlying inflation remains Subdued , saying “victory has not been declared and therefore “our policy will continue to be reactive”.
U.S president Donald trump officially declared that the new tariff plan will be effective in 15 days , however Canada and Mexico could be an exempt from 25 % and 10 % tarrif but the relief would be limited. Strong U.S labor market won’t affect fed rate plans , four rate hikes in 2018 still on the board. Market has already started giving signals of aggressive rate hikes but federal reserve still believes tighting will help to achieve 2% inflation. wall street panic is not hidden anymore,investors are worried by policies and aggressive rate hikes.
Canadian bulls are also ready to take over as employment report is due tomorrow along with NFP. The loony was under pressure after continues drop in crude oil and other macro releases. Canadian economy lost 88 thousand jobs in January and now investors are expecting 20, 000 new jobs in feb , anything less than forcast would allow usd/cad to 1.30. But a good news can potentially pull back Canadian dollar from overbought sold condition.
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