- FOMC and BoC meetings are ahead
- China/US announce deal on TikTok
- US dollar trading sideways ahead of Fed meeting.
USDCAD open 1.3754, overnight range 1.3737-1.3762, close, 1.3740, WTI 64.10, Gold 3667.99
The Canadian dollar rally traded sideways overnight ahead of the Bank of Canada decision this morning. Yesterday’s soft inflation report, paired with the ugly jobs data earlier in the month, leaves little doubt about a 25 bp rate cut. Policymakers are also expected to signal that more easing could follow given the lack of meaningful growth.
WTI oil moved within a 63.84-64.67 band, consolidating Tuesday’s gains while traders weighed the fallout from the FOMC and the impact of Ukrainian drone strikes on Russian facilities. Concerns over supply risks from Russia are being balanced by higher OPEC output. At home, Canadians will welcome a break at the pumps, with gas prices expected to fall as much as 10 cents per liter as the seasonal switch to winter blends kicks in.
The FOMC meeting promises some drama as it’s the first with new governor Stephen Miran, a Trump loyalist, casting a vote. He might make a splash by calling for a 1.0% cut. Across the table, Lisa Cook—fired by Trump, reinstated by the courts—could channel her frustrations his way. In the end, none of it changes the fact that a 25 bp cut is already priced in.
Asian markets slipped ahead of the decision. Japan’s Topix dropped 0.71% and Australia’s ASX 200 fell 0.67%, while upbeat chatter from the China/US meeting in Madrid lifted Hong Kong’s Hang Seng by 1.78%.
As of 7:20 am EDT, European bourses have given back early gains and are in negative territory except for the FTSE 100 index which is up 0.21%. The German DAX is down 0.14%, and the CAC 40 has lost 0.31%. S&P 500 futures are flat. The US Dollar Index sits at 96.77 and the 10-year Treasury yield is 4.01%.
EURUSD traded in a 1.1833-1.1873 range, consolidating the week’s earlier gains. The pair is supported by heavy FOMC rate-cut speculation even as the ECB holds steady for now. Inflation in the Eurozone eased to 2.0% y/y from 2.1% in July.
GBPUSD bounced inside a 1.3630-1.3660 band and sat mid-range in early New York dealing. UK inflation data was in line with forecasts but firm enough to lower the odds of BoE cuts this year.
USDJPY drifted in a 146.21-146.68 range. The tariff reduction to 15% that took effect yesterday has added pressure, giving the BoJ more space to lift rates. Narrowing spreads between US and Japanese yields weighed on the pair, while trade data out of Japan did little to shift sentiment.
AUDUSD traded defensively in a 0.6666-0.6690 band, with pre-FOMC US dollar selling countering support from expectations the RBA will hold rates at 3.6% on September 30.
US Housing Starts and Building Permits reports are due.
