Canadian Dollar Update, September 16, 2020 – Canadian Dollar awaits Fed
USD/CAD Open: 1.3157-61, Overnight Range: 1.3155-1.3200
WTI Oil is at $39.70 and gold is at $1,975.60. US markets are higher today.
For today, USD resistance is at 1.3215. Support is at 1.3134.
• OECD upgrades 2020 growth forecast
• Oil prices surge as US crude inventories fall
• US on the defensive ahead of Fed meeting
The Canadian dollar stayed inside the narrow range that contained price action since last Thursday, as it underperformed against its G-10 currency peers. Today is FOMC day, and markets expect a dovish result.
The Organisation for Economic Cooperation and Development (OECD) upgraded its 2020 growth forecast to -4.5% from -6.0%
Fed Chair Jerome Powell may have pre-empted this meeting with his Jackson Hole speech on August 27. That is when he detailed the Fed’s plans to change their inflation focus. Mr. Powell said they would adopt an Average Inflation Targeting around 2.0% policy, ending the “symmetric 2.0%” goal. He said the change was needed because “If inflation runs below 2 percent following economic downturns but never moves above 2 percent even when the economy is strong, then, over time, inflation will average less than 2 percent. Households and businesses will come to expect this result, meaning that inflation expectations would tend to move below our inflation goal and pull realized inflation down.” Average Inflation Targeting is designed to alter consumers’ expectations for inflation.
The FOMC releases an updated “Summary of Forecasts” which is widely expected to confirm the “low rates for longer” policy.
The US dollar retreated in Asia and Europe and added to its losses in early Toronto trading. GBPUSD rallied from an Asia low of 1.2877 to 1.2977 in Toronto, on rumours that UK Prime Minister Boris Johnson would amend his Internal Markets Bill, and offer concessions to the European Union in fisheries. GBPUSD bulls believe the government’s hostile rhetoric and the Internal Markets Bill are merely negotiation ploys to extract more favourable trade terms.
EURUSD climbed on the back of broad US dollar weakness, getting an added lift from a widening trade surplus. The non-seasonally adjusted trade balance rose to €27.9 billion in July, from €21.2 billion in June. European Central Bank (ECB) policymakers continue to make noises about “monitoring the exchange rate” which makes EURUSD bulls a tad cautious.
USDJPY plunged to 105.00, a level last seen July 31. The currency pair is under pressure due to the dovish expectations for the Fed and lackadaisical Asia equity markets.
The antipodean currencies (AUDUSD and NZDUSD) rallied on the back of broad US dollar weakness. NZDUSD got an extra boost as coronavirus restrictions were eased.
Canada inflation is on tap today. The results will not have an impact on the Canadian dollar as low inflation is a well-documented issue.
Today’s Suggested Range USD/CAD: 1.3110 – 1.3210