GBP falls as the Bank of England Governor confirms that recession is coming

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar             1.2800-1.2900

Euro                     1.3050-1.3150

Sterling                1.5450-1.5550

WTI Oil (opening level) $91.03

The US Dollar index was slightly weaker this morning until a few minutes ago when the Bank of England announced that they were increasing their benchmark interest rate by 0.5% to 1.75% a move that was widely expected. Normally Sterling would have jumped a bit but at the same time BOE Governor Andrew Bailey stated that they see inflation remaining high into the next year before moderating and that the country is heading into a recession. GBP.USD was trading near 1.2200 before the announcement and dropped 100 points right after the announcement to trade at 1.2080 as I write. The Loonie has also been able to benefit from the weaker Pound as GBP.CAD has dropped to trade at 1.5515 as I write and the currency pair looks set to move lower.

Prior to the BOE announcement the US Dollar was slightly weaker as the only response to the Pelosi visit from China was some trade sanctions against Taiwan and the Chinese military fired missiles into the sea near the island nation. I do think the Taiwan rhetoric will increase over the coming months as the US and China seem to be on a collision course over this issue. 

Markets are also looking at the new economic package that the Biden Administration has put forward and once again a single Democratic Senator may prevent it from passing as special interest groups are lining up to put pressure on its passage. If it fails you may see stocks give up more losses and the dollar move forward.

Overall, the Canadian Dollar continues to range trade against the US Dollar as for the moment it cannot break below the 1.2800 (0.7813) level but with the oil price coming under a little pressure over the last few days it will be interesting to see if that affects the Loonie and other commodity currencies.

A quiet day on the calendar today, we do get some trade data and Federal Reserve speakers but for the most part now the markets will await employment reports to be released tomorrow.