FXStreet (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital explained the G10’s movements in the London session earlier on today.
"Most of the ‘shifts’ in G10 this morning in London did not appear to have a basis in fundamentals. The GBP was softer, but even here, the ‘GBP-negative’ remarks from BoE officials need to be weighed against the already sizeable leveraged long position in the currency."
"Some of the GBP weakness was purely ‘squeeze related’. Against a relatively supportive environment for ‘risk’ and carry, the moves in the AUD, NZD and JPY don’t seem completely logical, but some participants may have just been caught on the wrong side of month-end flow."
"As our spot traders would probably say, the path of least resistance in USD/CAD is still lower. This would not be based on where many of the key drivers argue the pair should trade (1.0850-1.0900), but on the various pressure points in the system related to positioning, ‘pain’ and possible ‘stop-loss’ hunts."
"We’d therefore blame most of the bounce in USD/CAD since mid-morning on the move up in EUR/CAD. Better buying of the EUR was triggered earlier as a result of a softer AUD, and EUR/GBP short covering on the BoE."
"We still assume USD/CAD’s deviation from most of the key drivers is basically reducing the speed of the move lower in the pair, but that’s about all. The BoC has presumably favoured a weaker CAD, but it has done so timidly – for now."
"Probably the best chance USD/CAD has of obtaining the 1.0750-1.0775 range is on better US durables data tomorrow and a good showing in personal income, spending and the PCE deflator on Thursday. But with WTI above $105/bbl, 1.0750-1.0775 rallies should probably still be faded."
"However, the big ‘wild card’ in all of this now appears to be EUR/CAD again. On a pair-by-pair basis, the market is still probably net short of EURs."