Risk Aversion Buoys JPY, BoC

Risk aversion continued to dictate market direction, with the Japanese yen touching a new 15-year high against the dollar while most of the main  currencies fell against the dollar. The Canadian dollar fell by 1.2% and the euro slid by more than 1.5%. The US equity bourses tumbled after returning from the long weekend, with the major indexes losing more than 1%. Meanwhile, safe haven flows propped spot gold it’s a new record high to settle around $1,257.30 per ounce while crude oil drifted out to dip beneath the $73-per barrel mark.

Central bank policy decisions will be the key event risks in the week ahead. The Reserve Bank of Australia announced the results of its policy deliberation, leaving interest rates on hold at 4.5%. The accompanying policy statement was largely unchanged from the August statement, widely seen as more dovish and indicative the RBA leaving rates on hold for the rest of the year.

The Bank of Canada is scheduled to announce its monetary policy decision at 9:00 AM EDT, with consensus forecasts calling for a 25-basis point rate hike to 1.0%. Traders will closely scrutinize the accompany statement from the BoC. In light of the sharp pullback in second quarter GDP growth, which revealed the pace of economic growth slowing to 2.0% and down drastically from first quarter growth of 5.8%, it will be interesting to see whether the Bank will downwardly revise its growth outlook again following the downgrades from the policy statement issued in July. Given market expectations going toward a rate hike tomorrow, the risk stands with an untouched  BoC decision and a signal that interest rates will remain on hold in the near future as a result of the fall in economic activity.

The best forex brokers