Canadian Dollar Update – Canadian dollar rangebound (again)
USD/CAD Open: 1.3607-11, Overnight Range: 1.3584-1.3631, Previous Close: 1.3615
WTI Oil open at $68.97 and gold open at $2,037.86. US markets are lower today.
For today, USD resistance is at 1.3553. Support is at 1.3520.
- Fed hikes and hints at a pause.
- ECB expected to hike rates 25 bps.
- US dollar trading defensively, opens mixed.
The Canadian dollar was whipped about in the wake of the FOMC statement and Fed Chair Powell’s press conference. However, it failed to break out of this week’s range.
The Fed delivered a dovish rate hike. The benchmark rate increased by 25 bps which was universally expected but tweaked the statement.
The sentence, “The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” was removed and replaced with the following: “The Committee will closely monitor incoming information and assess the implications for monetary policy.”
Big deal you say? Fed Chair Jerome Powell thinks so. He said it was a meaningful change as it meant the committee doesn’t expect to hike rates but will wait to assess incoming data before making a decision.
Mr. Powell specifically said the Committee is not announcing a “pause.” Markets disagreed. The US dollar slid and the 10-year Treasury yield plunged to 3.35% overnight compared to 3.60% on Monday.
The statement also proclaimed that the US banking system is sound and resilient. Investors didn’t believe him and trashed PacWest Bank shares, which forced management to announce they were “exploring options.”
Wall Street didn’t like that news which is one of the reasons stocks closed with losses.
Today, the focus shifts to the European Central Bank. The ECB is expected to hike rates by 25 bps and issue hawkish guidance. The diverging EU and US interest rate outlook underpins EURUSD.
EURUSD touched 1.1090 after the FOMC meeting and again just as Europe opened. Prices danced in a 1.1038-1.1090 range and are at 1.1068 in NY.
GBPUSD rallied on the weaker greenback, rising from 1.2554 to 1.2593. Prices are also boosted by expectations that the Bank of England will raise rates 25 bps next week.
USDJPY returned from a three-day break and traded in a 134.16-134.81 band. USDJPY traded at 137.45 on Monday then dropped when the US 10-year Treasury yield fell into free-fall.
AUDUSD traded in a 0.6642-0.6698 range and has a bullish bias thanks to the RBA’s surprise 25 bp rate hike on Tuesday.
Today’s US data includes weekly jobless claims and trade data. The Canadian calendar has merchandise trade and the Ivey PMI along with a speech from BoC Governor Tiff Macklem.