Dovish Bank of Canada helps the indices
26 January 2023
Wednesday brought us an unexpected hero – the Bank of Canada. We all knew that there is a rate decision in the calendar along with the statement and the press conference but not many experts were expecting a shift in the monetary policy. Yes, BOC increased rates by 25bp but at the same time, signaled a pause. This ‘pause’ is crucial here and is the reason why this statement was received as a dovish one. How does it influence the market? Well, traders do have hope that this will be also the stance of the FED, which would be positive for the stocks and negative for the USD. That is why, stocks surged yesterday, while the USD dropped.
Tesla reported earnings yesterday. EPS was better than expected at 1.19 (1.15 exp), so the trend of beating the estimates from the previous quarters is still alive. We had a small miss on the revenue though (24.32B vs 24.68B). Results were published after the market was closed and in after-hours trading, Tesla is now gaining, so we can assume that Thursday will be bullish for this carmaker. In the earning calendar today, we have Visa and Mastercard. Visa will publish the numbers after and Mastercard before the session.
The macro calendar is also interesting today. Europe is unusually quiet but the fireworks will happen in the US, where we will get the GDP data. 2.6% is expected. Apart from that, we will also find out the Durable Goods orders and as usual, Unemployment Claims.
On the commodities front, we saw Gold making another new, long-term high. On the other hand, Oil is struggling at the moment even despite two bullish factors. The first one is technical, so for example Brent managed to break the long-term down trendline and is still trading above it. The second one was the Crude Oil Inventories data from yesterday, which happened to be lower than expected, which is generally considered a bullish factor.
On the Forex market, we can see the weakness of the CAD after the dovish BOC as well as the weakness of the USD, also partially because of the dovish BOC as investors are expecting the same approach from the FED. USDJPY remains in the channel down the formation and EURUSD keeps making new, long-term highs. Same thing, different day.