- Fed and BoC expected to leave interest rates unchanged today
- Oil prices drift lower and global equity indexes rise.
- The US dollar opens mixed and little changed from yesterdays close
USDCAD open: 1.3698, overnight range 1.3687-1.3713, close 1.3691, WTI 94.30, Gold 4991.49
The Canadian dollar drifted aimlessly ahead of the Bank of Canada and FOMC meetings today. No one expects the BoC to alter its monetary policy stance and Trumps war with Iran reinforces that view. Furthermore, on October 29, Governor Tiff Macklem said monetary policy has done all it can to support growth, noting that tariff-driven disruptions are forcing a longer-term economic adjustment that rate changes cannot fix.
WTI traded in a 91.49-95.64 range, with the low set in Asia after the API reported a 6.6 million barrel build in US crude inventories. Prices were also weighed down by news that Iraq and Kurdistan agreed to restart a pipeline, although the additional 250,000 barrels per day is marginal in the context of global supply.
Trump’s attack on Iran stripped away what little suspense remained ahead of today’s FOMC meeting. There wasn’t much to begin with. The Fed was already expected to leave rates unchanged, and the surge in oil prices alongside supply chain disruptions has only strengthened the case for standing pat.
The risk is in the messaging. If traders interpret the statement or Powell’s press conference as hawkish, the US dollar and Treasury yields will likely push higher, while equities come under pressure.
Asian equity markets followed Wall Street higher. Japan’s Topix jumped 2.49% on the back of strong trade data. Australia’s ASX 200 gained 0.31%, and Hong Kong’s Hang Seng rose 0.61%.
As of 7:10 am, the CAC 40 is up 0.99%, the DAX has climbed 0.73%, and the FTSE 100 has gained 0.26%. S&P 500 futures are up 0.42%, and the US 10-year Treasury yield is at 4.179%.
EURUSD traded in a 1.1515-1.1550 range in a quiet session ahead of the FOMC decision and tomorrow’s ECB meeting. The prospect of higher energy-driven inflation suggests the ECB may lean neutral to slightly hawkish. HICP eased by 0.1% m/m in February to 0.6%, while the annual rate held at 1.9%.
GBPUSD traded in a 1.3342-1.3375 range, edging higher with support coming from softer oil prices. In the UK, rising energy costs are expected to impact consumers, with higher production and distribution expenses likely to push up prices at pubs.
USDJPY traded in a 158.57-159.14 range, rebounding after stronger-than-expected Japanese trade data, including a 4.2% rise in February exports. The Bank of Japan is widely expected to leave rates unchanged tomorrow.
AUDUSD traded in a 0.7098-0.7124 range, holding steady but underpinned by the Reserve Bank of Australia’s 0.25% rate hike to 4.10% and its hawkish outlook.
