The Canadian dollar remains rangebound. USD/CAD is trapped inside the well-defined $1.2600-$1.2700 band with topside moves thwarted by high oil prices and the prospect that the Bank of Canada raises interest rates before the U.S. Federal Reserve.
The downside is limited due to bullish USD/CAD technicals and broad U.S. dollar demand resulting from renewed global growth concerns and fears of an equity market selloff. USD/CAD continues to be underpinned by fallout from the FOMC’s hawkish shift. Traders were caught off guard by the Federal Open Market Committee dot-plot projecting a rate hike in 2022.
Asia markets were pressured from the fallout of Tuesday’s Wall Street meltdown. The Nikkei 225 led the major indexes lower, falling 2.12%. Chinese markets underperformed due to ongoing concerns around Evergrande, and domestic power issues, ahead of the Golden Week holiday period.
European markets opened in rally mode and the French CAC 40 index, gaining 1.21%, is leading the charge. Wall Street futures were rebounding with S&P 500 futures rising 0.8% (as of 6:50 am ET). The rally is fueled by the drop in the U.S. 10-year yield to 1.50% from 1.558% in Asia.
Markets were amused by, but ignored, comments from Massachusetts Senator Elizabeth Warren, a left-wing Democrat who said Jerome Powell was "a dangerous man to head up the Fed."
EUR/USD was at the bottom of its $1.1656-$1.1689 range. European Central Bank Governing Council member Gabriel Makhlouf’s dovish comments underscored the difference in the ECB and Fed interest rate outlooks, which weighed on the currency. Eurozone economic sentiment rose to 117.8 from 117.6 in August, which ING analysts say suggests the Eurozone recovery is still on track. A break below $1.1650 targets $1.1580.
GBP/USD continued to get hammered on fears the energy crunch will derail U.K. growth. GBP/USD extended yesterday’s slide, falling from 1.3554 to 1.3479 where is sitting in New York. A break below $1.3440 targets $1.3270.
USD/JPY drifted down from 111.67 t0 111.22 in tandem with the retreat in the US 10 year Treasury yield. Japan has a new Prime Minister, Fumio Kishida, who will lead the LDP party in the upcoming election.
AUD/USD and NZD/USD are trading at their overnight lows, weighed down by global growth concerns, China worries, and broad US dollar strength.
Fed Chair Powell and New York Fed President Williams are speaking. They are unlikely to say anything new.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
