– Fed caution sinks Loonie.
– Bank of England leaves overnight rate at 5.25%..
– US dollar consolidating Wednesday’s gains.
USDCAD: open 1.3456-60, overnight range 1.3420-1.3464, close 1.3436., WTI $76.38, Gold, $2032.09
The Canadian dollar is playing defence again. It went on the offensive yesterday after November GDP was higher than expected (actual 0.2% vs forecast 0.1%) and the December estimate was pegged at 0.3% m/m.
The better than expected results suggests that Canada will avoid a recession despite the economy being pummeled by the series of Bank of Canada interest rate increases since 2022. The results also gave the Bank of Canada more room to decide when to cut rates.
USDCAD dropped from 1.3430 to 1.3359 in the wake of the GDP report but met stiff technical support in the 1.3360-70 zone. Prices bounced then soared after the FOMC meeting. The Fed left interest rates unchanged but its message was more hawkish than expected, despite removing the reference its tightening bias. That’s because the statement said, “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
Stocks fell and the US dollar rallied. The greenback added to its gains overnight but S&P 500 futures are clawing back some losses.
EURUSD is trading lower in a 1.0780-1.0822 range due to a mix of weak Euro area PMI reports and disappointment following the FOMC meeting. Eurozone Manufacturing PMI was 46.6,which contrasts with the robust US economy. Eurozone inflation data gave the single currency a little support. Eurozone Core CPI rose 3.3% y/y compared to the forecast of 3.2%.
GBPUSD is bouncing in a 1.2626-1.2698 range ahead of the Bank of England press conference. The Boe left rates unchanged at 5.25% but the decision was mixed. Two members wanted to raise rates and one member wanted to cut them.
USDJPY is choppy in a 146.47-147.09 band due to lower US 10-year Treasury yield which is 3.93%.
AUDUSD traded lower in a 0.6508-0.6579 range undermined by soft Australian data and lower commodity prices.
US ISM PMI data, Challenger Job cuts, and weekly jobless claims are ahead