- FOMC decision leaves analysts wondering.
- Oil prices are steady despite renewed Middle East war
- USD opens with losses across the board.
USDCAD open: 1.4054, overnight range 1.4031-1.4068, close 1.4047, WTI 84.59, Gold 4,063.88
The Canadian dollar is trading slightly higher as broad-based US dollar selling after yesterday's FOMC decision and Fed Chair Warsh's press conference. Investors are annoyed at Warsh’s refusal to provide any guidance on the future direction of interest rates.
Yesterday's release of the BoC Summary of Deliberations offered little fresh information. At the time of the meeting, Governing Council viewed the threat of additional US tariffs as a downside risk. A week later, President Trump transformed that risk into reality.
Despite the escalating conflict, oil markets remain remarkably composed. WTI has fallen 1.16% since yesterday and is trading at USD 83.50 per barrel in New York.
The US dollar is trading defensively against the majors after the Fed held rates at 3.50-3.75%. The move was expected, though three regional presidents, Logan, Hammack and Kashkari, dissented in favour of a 25bp hike.
Renewed fighting in the Middle East has also unsettled investors after US forces struck Iran and Tehran retaliated with attacks on neighbouring countries.
Asian markets closed with Japan's Topix falling 0.54%, Hong Kong's Hang Seng rising 0.20% and Australia's ASX 200 dropping 0.78%.
As of 7:25 am, the UK FTSE 100 is up 0.19%, the German Dax is up 0.14% and the French CAC 40 has surged 0.94%. S&P 500 futures are up 0.57%, the 10-year Treasury yield sits at 4.686%, and the DXY is 100.73.
EURUSD bounced in a 1.1434-1.1484 band as traders and economists debate whether Warsh leans hawkish or dovish. The eurozone economy, meanwhile, keeps chugging along despite Trump's tariffs and his war with Iran. Q2 GDP grew 0.4% on the quarter, while German output rose 0.9% y/y, well ahead of the 0.6% forecast. Direction today stays tied to the FOMC fallout.
GBPUSD traded firmer in a 1.3333-1.3407 range with the peak seen after the Bank of England kept its policy rate unchanged at 3.75%, However, the vote revealed a more hawkish split than expected, with three policymakers favouring a rate increase. The BoE also warned that inflation is likely to accelerate while economic growth stalls.
USDJPY slipped to the bottom of a 162.30-163.74 range in early New York dealing, weighed down by traders paring back near-term Fed hike risk even as September hike odds climbed to 65% from 57% a day earlier. The BoJ's own rate decision lands tomorrow, with no change anticipated.
AUDUSD rebounded in a 0.6946-0.69684 band in the wake of the Fed decision. Softer domestic inflation data has already downgraded the odds of an RBA hike, and the ongoing hawkish-or-dovish guessing game around Warsh added broad dollar selling pressure to the mix.
Todays US data includes US GDP Advance for Q2, core PCE, jobless claims and personal spending.
