Morning Commentary & Currency Insights – October 24, 2018

The dollar index soared above resistance at 96.16 hitting 2 month highs as EU PMI sunk to 52.7 from 54.1. “The headline PMI has fallen to a level which would historically be consistent with a bias toward loosening monetary policy in order to prevent any further deterioration of economic growth.” (CIBC)  Also weighing on the EUR is the fact that Italy, the zone’s third-largest economy, continues to insist upon a spending program creating a deficit of 2.4%, contrary to the 2% target as set by the European Commission.  Sterling is adding to the fray falling to a six week low ahead of Prime Minister May’s address to Conservative Party lawmakers who are upset with Brexit negotiations to this point.

Today’s BOC rate hike is all but announced formally with all the market’s focus now on the accompanying MPR and press conference.  The BOC has recently focused on “broad-based competitive losses” and continued mention of this will have the market perceiving the Bank to have a bias toward a more cautious approach on further rate hikes.  Wide levels to look for on the day are 1.3000-20 below & 1.3130-50 above.