The Canadian dollar traded sideways after drifting a tad lower following yesterday’s U.S. Federal Open Market Committee meeting. The Fed cut the overnight Fed Funds range from 2.00=2.25% to 1.75-2.00%. That move was fully reflected in prices, but the latest "dot-plot" forecast was a bit of a surprise. The "dots" indicated that policymakers didn’t foresee any further changes in U.S. interest rates until the end of 2020.
That wasn’t what President Trump wanted to hear. Expressing his outrage, tweeting "Jay Powell and the Federal Reserve Fail Again. No 'guts,' no sense, no vision! A terrible communicator!"
The U.S. dollar rallied following the Fed news, but the rally wasn’t very aggressive and more the most part, it was short-lived. The greenback closed Wednesday with minor gains and opened today in Toronto with small losses.
The Australian dollar did not have a good session. Prices came under pressure after the Fed announcement and again in Asia when Australian employment data disappointed. The headline numbers were decent, showing a gain of 34,700 jobs, compared to the forecast for just 10,000. The devil was in the details. All the gains were part-time, and the unemployment rate rose to 5.3% from 5.2% in July.
The New Zealand dollar was weighed down by the apparent pause in U.S. rate-cutting. Prices tracked AUS/USD moved lower, but not to the same extent.
Elsewhere, it was a central bank meeting bonanza. The Bank of Japan, Bank of England, Swiss National Bank and Norges Bank (Norway) held policy meetings.
The Bank of Japan left interest rates unchanged but singled monetary policy easing may occur in October. BoJ Governor Haruhiko Kuroda said "We are more eager to act given heightening global risks. We will scrutinize economic and price developments thoroughly at next month’s meeting to decide whether to ease."
The Bank of England policy meeting was today as well. They surprised no one and left interest rates unchanged at 0.75%, for the 13th consecutive month. They warned that the U.K. economy would suffer more from another Brexit delay, saying: "The longer those uncertainties persist, particularly in an environment of weaker global growth, the more likely it is that demand growth will remain below potential, increasing excess supply. In such an eventuality, domestically generated inflationary pressures would be reduced."
The Swiss National Bank left interest rates unchanged at -0.75% and lowered the cost to banks that hold excess reserves. The results were in line with expectations.
In Norway, the Norges Bank raised its benchmark interest rate by 0.25% to 1.5% and then hinted that rates might be on hold for a while.
Today’s U.S. economic data calendar includes Philadelphia Fed Manufacturing Index, Initial Jobless Claims and Existing Home Sales. The Canadian calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
