Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data 
RBI Cuts Repo Rate to 5.25% as Inflation Cools and Growth Outlook Strengthens 
Japan’s Inflation Edges Higher in October as BOJ Faces Growing Pressure to Hike Rates 
UK Raises Deposit Protection Limit to £120,000 to Strengthen Saver Confidence 
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
BOK Expected to Hold Rates at 2.50% as Housing and Currency Pressures Persist 
Japan’s Rising Inflation Strengthens Case for a Near-Term BOJ Rate Hike 
Energy Sector Outlook 2025: AI's Role and Market Dynamics 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
Singapore Maintains Steady Monetary Outlook as Positive Output Gap Persists into 2025 
RBA Signals Possible Rate Implications as Inflation Proves More Persistent 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Brazil Central Bank Plans $2 Billion Dollar Auctions to Support FX Liquidity 
Fed Officials Split as Powell Weighs December Interest Rate Cut 
The Bank of Canada is scheduled for its monetary policy meeting today, and most likely to maintain the status quo to leave its key rate unchanged. There would be no surprises on that front.
However, that does not mean that CAD traders can sit back and relax today. As is often the case the devil is in the detail: will the BoC stick to its view that further gradual rate hikes will be necessary for the future despite the fact that the Fed has now taken a neutral view? We assume so. Of course, Canada, too, is facing huge uncertainties for the outlook – such as the as yet unsolved trade conflict between the US and China as well as global growth concerns.
However, the BoC had started to hike interest rates later and more cautiously than the Fed, which reflected the much more immediate risk for the domestic economy as a result of the NAFTA renegotiations.
As a result, it still has some catching up to do. Most recently the BoC assumed that it still has scope for a few more cautious rate hikes until a neutral position is justified. Market participants are questioning this and are pricing in a further rate hike this year with only a small likelihood. So if the BoC once again confirms its expectations of further rate hikes CAD should benefit.
CAD OTC indications and options strategy:
3M ATM IVs are trending a shy above 6.26% - 6.58%, skews are also suggesting the odds on OTM call strikes up to 1.36 levels at this juncture. We could also notice bullish neutral risk reversals that signal upside risks in the risk-neutral distribution of returns. Also, the IV curve is at, or slightly decreasing, with maturity.
Favor optionality to directional trades. We are inclined to position for a directional call spreads, as calling the bottom is quite difficult and adding naked spot exposure is risky at the moment.
Thus, call spreads are preferred option structures given elevated skew and favorable cost reduction.
At spot reference: 1.3360 levels, we execute USDCAD 3m/1m call spread with strikes of 1.36/1.32 for a net debit.
Maintain the net delta of the position above 40% and shorting the upper leg call (OTM strikes) likely to reduce the cost of the ITM call by almost close to 20-25%. Courtesy: Commerzbank
Currency Strength Index: FxWirePro's hourly EUR spot index is inching towards 36 levels (which is mildly bullish), while hourly USD spot index was at 118 (highly bullish) while articulating (at 11:54 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
