Canadian Dollar Update July 30, 2019 – Canadian Dollar awaiting the Fed
USD/CAD Open: 1.3176-1.3177 Overnight Range: 1.3153-1.3184
Oil is at $57.09 and gold is at $1,430. US markets are lower today.
The short-term USD/CAD technicals are neutral-bearish. For today, USD resistance is at 1.3201. Support is at 1.3155.
The Canadian dollar was sidelined overnight. It was not alone. The Australian, New Zealand and Canadian dollars drifted modestly lower in subdued trading. Traders bided their time until tomorrow afternoon’s Federal Open Market Committee (FOMC) policy statement. Analysts that were expecting a 0.50% rate cut pared back their expectations after last week’s US GDP was stronger than expected.
Nevertheless, a 0.25% cut is 100% priced in. Markets are undecided if a rate cut on Wednesday will be a case of “one-and-done” or if it will be the first in a series. President Trump is all for the latter even though Fed Chair Powell maintains that the Fed is independent and not swayed by Mr. Trump’s wishes.
The Canadian dollar lost a little ground in a somewhat quiet overnight session, following in the steps of the Australian and New Zealand dollars. Those currencies were under pressure, in part, because a less than dovish Fed would contrast with the overtly dovish monetary policies of the Reserve Bank of New Zealand and the Reserve Bank of Australia.
The most significant currency mover overnight was the British pound. GBPUSD plunged to a multi-year low of 1.2120 on fears that on October 31, the UK would leave the European Union without a deal. Prime Minister Boris Johnson and members of his cabinet have encouraged the sentiment. Mr. Johnson said that the Irish border deal agreed to by Theresa May is unacceptable. The EU responded that the issue was non-negotiable. On the weekend, Michael Gove, another Johnson crony said that the government was operating on the assumption of a “no-deal Brexit”. Johnson’s stance may be a ploy to attract members from the Brexit party back to the Conservative Party. If successful, it would improve his prospects for an election win, according to some pundits.
The China/US trade talks are on-going in Shanghai, and neither side released a “progress report”. Markets are expecting protracted negotiations, so have put the trade concerns on the “back-burner”. Nevertheless, that could change with a headline.
The Canadian dollar is languishing in a narrow band, in part due to a lack of top-tier, actional, economic data. That will change tomorrow when May GDP results are available. The forecast is for a sluggish gain of 0.1% due to sluggish Retail Sales and Wholesale Sales. A better-than-expected result would boost the Canadian dollar.
There is a lot of US economic data today, including June Personal Income/Spending and Case-Shiller Home Price index data. The reports should not have a lasting impact on FX trading ahead of the Fed on Wednesday.
Today’s Suggested Range USD/CAD: 1.3130 – 1.3230