- Delayed reaction to hawkish FOMC outlook
- Bank of England raises rates by 50 bps, but its not unanimous
- US dollar rebounds and gains across the board
USDCAD snapshot open 1.3566-70, overnight range 1.3543-1.3607, close 1.3547, WTI $77.40, Gold $1778.00
The Canadian dollar is finally reacting to the FOMC meeting results which were more hawkish than expected.
USDCAD opened at the same level today as it did yesterday and even the overnight session ranges were very similar. Prices started to climb in early NY trading, reaching 1.3607, in response to the S&P 500 futures dropping 1.10% overnight.
Yesterday, the FOMC raised the fed funds rate by 0.50% to 4.25% which was widely expected. However, the updated Statement of Economic Projections and Jerome Powell’s comments in the press conference were rather hawkish.
The dot-plot forecast projected the terminal rate would be 5.1% compared to 4.6% in September which implies another 75 bps in hikes in 2023. PCE core inflation estimates increased to 3.5% from 3.1% while GDP growth slowed to 0.5% from 1.2%.
Mr Powell said that even after the latest interest rate bump, rates were not sufficiently restrictive.
The Fed and Bank of Canada’s interest rate outlooks are different. BoC governor Tiff Macklem suggested that the 50 bp hike in December may be all that is need, which suggests Canadian dollar gains will be limited.
The Bank of England raised its benchmark rate by 50 bps to 3.50%, which was anticipated. Policymakers were not united. Six voted for the increase, one wanted a 75 bp bump and two others wanted rates to be unchanged. Some analysts are predicting that the peak rate will be 4.0%.
GBPUSD traded in a 1.2289-1.2426 range with the bottom seen post- BoE.
Norway’s Norges Bank raised its benchmark rate by 0.25% while the Swiss National Bank hiked 50 bps. Those moves were not a surprise.
EURUSD is trading defensively in a 1.0607-1.0683 ahead of an anticipated 50 bps rate hike from the ECB.
USDJPY rallied from 134.85, post-FOMC to 136.92 in Europe on the hawkish Fed outlook and the implication of another 75 bps in tightening.
AUDUSD is at the bottom of its 0.6752-.06869 range despite a robust employment report. Australia added 64,000 jobs compared to predictions for a 19,000 increase.
NZDUSD traded negatively in a 0.6363-0.6462 range with better-than-expected Q3 GDP growth (actual 6.4% vs forecast 5.5%) dismissed.
Today’s US data includes weekly jobless claims, Philadelphia Fed Manufacturing Survey, Retail Sales, Capacity utilization and Industrial production.
