- FOMC minutes have a hawkish bias
- Oil firms on US/Iran tensions
- US dollar consolidates yesterdays gains.
USDCAD open: 1.3682, overnight range 1.3668.-1.3705, close 1.3696, WTI 65.97, Gold 4993.02
The Canadian dollar extended its losses overnight after slightly hawkish FOMC minutes tempered expectations for Fed rate cuts.
The Liberal government of Mark Carney may soon have a majority government if opposition party members keep defecting. A Toronto area Conservative MP crossed the floor leaving Carney just three seats shy of a majority.
Oil prices are bid on fears that a US attack on Iran is imminent. WTI rose to 66.29 from 64.84 as traders fear oil supplies through the Strait of Hormuz will be disrupted.
The US dollar picked up a modest safe-haven bid yesterday due to elevated US and Iran tensions, before surrendering part of the advance overnight. Even so, the US Dollar Index (DXY) remains 0.80% higher on the session.
The latest FOMC minutes carried a hawkish undertone. Policymakers warned that returning inflation to the 2% target could prove slower and more uneven than anticipated and emphasized that the risk of inflation remaining persistently above target was still meaningful.
Asian equity markets advanced in holiday-thinned conditions. Japan’s Topix climbed 1.18% and Australia’s ASX 200 added 0.88%, while Chinese markets were closed.
As of 7:30 am, Germany’s DAX was lower by 0.84%, France’s CAC-40 had fallen 0.78%, and the UK FTSE 100 was down 0.64%. S&P 500 futures were off 0.15%. The US Dollar Index stood at 97.80, and the 10-year Treasury yield was 4.094%.
EURUSD traded in a 1.1782–1.1808 range, consolidating the previous day’s decline. Analysts at ING argue that European equity outperformance relative to the US is helping to cushion downside risks. With little euro-area data on the calendar and US releases, including weekly jobless claims, still ahead, trading activity has been muted.
GBPUSD traded negatively in a 1.3470–1.3516 range and remains pinned near the lower end, pressured by the hawkish tone of the FOMC minutes. Expectations that US rates could remain elevated for longer, contrasted with a more dovish Bank of England stance, continue to weigh on the pair. Market attention was also diverted by headlines surrounding former Prince Andrew’s arrest for alleged misconduct in public office following a pre-dawn operation at Sandringham.
USDJPY chopped between 154.62 and 155.34, rising during the Asian session before retreating into the New York open. Higher US Treasury yields and broader US dollar strength in the wake of the FOMC minutes provided initial support.
AUDUSD held a narrow 0.7720–0.7743 range in choppy trading. Australia’s unemployment rate remained steady at 4.1%, reinforcing the view that the economy continues to operate near full capacity and leaving open the possibility of further rate increases down the line.
