– FOMC decision ahead
– BoJ hikes rates to 0.25%
– US dollar opens on mixed note as yen outperforms.
USDCAD: open 1.3843, overnight range 1.3834-1.3859, close 1.3850, WTI $76.74, Gold, $2421.14
Loonie’s direction is at the mercy of external developments, including geopolitical tensions and the Federal Open Market Committee meeting today.
Geopolitical tensions ratcheted higher again overnight in the Middle East.
That was enough to spook oil traders who boosted the price of West Texas Intermediate (WTI) to $77.49 from $75.19. However, OPEC’s plans to ramp up production in October and China’s ongoing economic woes suggest supply will outstrip demand into year-end, limiting gains.
The FOMC meeting is not likely to create much of a stir. Analysts are hoping that policymakers offer guidance about a September rate cut, but recent remarks by Fed Chair Jerome Powell suggest otherwise. The statement may be close to identical to the previous one as policymakers await further economic data to ensure inflation is on a sustainable downtrend.
The Bank of Japan was the star of the overnight session. The BoJ hiked rates by 0.15 bps to 0.25% while indicating they would be lowering bond purchases. USDJPY sank from 153.89 to 152.50 where it found a floor. Then the floor gave way, which may indicate that the BoJ intervened.
EURUSD is in the middle of its overnight 1.0806-1.0833 range. Traders were unimpressed with Eurozone inflation data, which saw the headline number rise to 2.6% in July from 2.5% in June. That result could throw a wrench into the September 12 ECB rate decision, but there is still plenty of data in the pipeline.
GBPUSD drifted quietly in a 1.2820-1.2853 band. Traders are twiddling their thumbs ahead of today’s FOMC decision and tomorrow’s Bank of England rate announcement, where a quarter-point cut is expected.
AUDUSD traded negatively in a 0.6479-0.6545 range after inflation data was somewhat disappointing. Nevertheless, the results should not deter the RBA from cutting rates next Tuesday. Additionally, AUDJPY selling weighed on prices.
The Canadian economic calendar is empty.
