FX market movement on Thursday is predominantly calm and measured. US futures remain in defense mode after yet another leg higher on Wednesday, where European markets rose on the eve of the ECB update. Oil prices pulled back as upside momentum stalled on lack of bullish catalysts and negative data updates.

Despite the calm, risk appetite dominates in market sentiment as investors boost asset prices in anticipation of complete easing of pandemic restrictions.

The most important data points on Thursday are inflation reports which had a moderately upbeat impact on the markets. New Zealand and the United Kingdom delivered a positive surprise, while Canada inflation disappointed.

Inflation in New Zealand beat forecasts. NZD rose on the report, as the chances of early RBNZ stimulus tapering increased. British inflation data was generally positive, production prices exceeded forecasts in March. Cost-push inflation will likely manifest in CPI in the coming month in what has a slightly hawkish implication for BoE policy.

The Bank of Canada unexpectedly announced tapering of QE at yesterday meeting and hinted at interested rate rise earlier than previously expected. USDCAD fell from 1.2630 to 1.2500 on the sudden policy tweak. The BoC decision became the early flare that central banks of developed countries begin to think about leaving the vicious circle of low rates. Actually, the race of the central banks in the sense of quitting stimulus becomes the primary driver in major currency pairs in the medium-term.

Due to the unexpected decision of the BOC and given stubborn Fed stance on rate hikes, bearish pressure is set to increase in USDCAD. The pair managed to hold in the downward corridor after the test of the upper bound on Wednesday:

An interesting situation is now unfolding in XAUUSD. The technical picture suggests the fate of the medium-term downtrend (began in August 2020) and short-term uptrend (started in April 2021) is being decided there:

Confluence of two areas of resistance increases the chances that a test of $1800 level may be followed by a sell-off, however prolonged consolidation in the area of $ 1785-1800 may indicate at impending breakout. Further fate will depend on whether the price will be able to keep above the top border of the channel.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.