- Fed expected to hike rates 75 bps today
- UK economy hit by rail strike
- US dollar retreats overnight except against EUR
USDCAD Snapshot open 1.2856-60, overnight range 1.2849-1.2887, close 1.2884, WTI oil $95.15, Gold $1722.40
The Canadian dollar is trading choppily inside a USDCAD 1.2849-1.2887 overnight range.
FX markets globally are making time until this afternoons FOMC interest rate announcement and Fed Chair Jerome Powell’s press conference.
The Fed will almost certainly raise interest rates by 0.75% which will bring Fed funds to just below the mid-point of the 2.0-3.0% neutral rate range. Mr Powell previously warned that rates may need to rise above the neutral rate and stay there until inflation returns to its targeted 2.0% level.
Economists, analysts and traders will be studying the monetary policy statement and pay close attention to the press conference for clues as to whether September’s rate hike will match today’s or be a less aggressive 50 basis points.
Wall Street closed on a negative note, but positive sentiment following Alphabet and Microsoft quarterly earnings reports helped to boost Asian equities. Japan’s Nikkei 225 and Australia’s ASX 200 indexes closed up 0.22%.
European bourses are posting small gains led by a 0.50% bump in the UK FTSE 100 and S&P 500 future are 0.44% higher. WTI oil gained 1.25% while gold rose 0.14%. The US 10-year Treasury yield is 2.80%
EURUSD dropped steadily yesterday, falling from 102.49 in Asia to 1.0110 by lunchtime in NY, and consolidated those losses in a 1.0118-1.0158 range overnight.
GBPUSD squeezed out gains overnight, rising from 1.2030 to 1.2087 before easing to 1.2060 in NY. Prices were boosted by EURGBP selling after European gas prices surged close to levels seen when Russia invaded Ukraine. A massive train strike does not help the UK’s economic woes. The union turned down a 4% increase for the rest of 2022 and 2023.
USDJPY chopped about in a 136.54-137.14 range with prices weighed down by soft US Treasury yields and reports that Japanese investors are repatriating proceeds from foreign bond sales.
AUDUSD rode a roller coaster overnight in a 0.6914-56 range. Prices rallied in Asia until the inflation report. Australia's CPI rose 6.1% y/y, a tick lower than the 6.2% expected.
AUDUSD dropped to the low before recovering nearly all the losses in Europe. The CPI data was enough for economists at Goldman Sachs and Deutsche Bank to lower their rate hike predictions to 0.50% from 0.75%, at next week's meeting.
NZDUSD traded similarly to AUDUSD in a 0.6223-0.6246 band.
US June Durable Goods Orders ((forecast -0.4% compared to 0.8% in May), and Pending Home Sales are ahead.
