Canadian Dollar Update, August 27, 2020 – Canadian Dollar firms ahead of Powell speech
USD/CAD Open: 1.3149-53, Overnight Range: 1.3101-1.3166
WTI Oil is at $43.09 and gold is at $1,935.50. US markets are mixed today.
For today, USD resistance is at 1.3197. Support is at 1.3038.
• Fed Chair Powell delivers major speech this morning
• Hurricane Laura underpins crude prices on supply disruption fears
• US dollar opens little changed from yesterday’s close after quiet overnight session
The Canadian dollar inched higher overnight but remained inside the recent range. Financial markets waited for today’s speech by Fed Chair Jerome Powell. He announced the findings from the Monetary Policy Framework Review, in a speech titled “Navigating the Decade Ahead: Implications for Monetary Policy.”
Markets expected that a new inflation paradigm will be centerpiece of the speech. Mr. Powell was expected to announce that the Fed will no longer have a 2.0% inflation target. It will be replaced by an “Average Inflation Targeting” measure of 2%. The move is considered dramatic, at least in central bank circles. It gives the Fed more leeway to manage its mandate of “maximum employment, stable prices, and moderate long-term interest rates.” Some analysts believe it would allow the Fed to tolerate a higher inflation rate while it attempts to support economic growth.
The Fed isn’t the only central bank worried about stubbornly low inflation. It is a common them around the world. The Bank of Canada (BoC) appears to be setting the stage to follow whatever new strategy the Fed adopts.
Markets were quiet overnight.
Asia equity indexes closed on a mixed note, while European equity indexes are trading lower, as are S&P futures. West Texas Intermediate (WTI) are consolidating gains made on Tuesday, as Hurricane Laura made landfall in Texas and forced refineries to close.
The US dollar has been sliding in anticipation of very dovish remarks by Mr. Powell.
USDCAD traded in a 1.3138-1.3165 range, as it mirrored broad US dollar moves. Today’s US Jobless Claims may spark mild risk aversion if claims are above last week’s 1.104 million increase.
Today’s Suggested Range USD/CAD: 1.3100 – 1.3200