- Greenback supported by Fed rate outlook
- Oil prices remain comfortable above $100/barrel
- US dollar opens mixed but rallies vs JPY despite BoJ rate hike.
USDCAD open: 1.3998, overnight range 1.3976-1.4008, close 1.3990, WTI 101.50, Gold 4,377.49
The Canadian dollar dropped after the Fed raised rates on Wednesday, and it continued to struggle overnight. Widening 2-year and 10-year CAD/US interest rate spreads are behind the losses in addition to diverging Fed and BoC policy expectations.
WTI traded in a $99.39-$101.64 range, establishing its Asian low before recovering ahead of the New York open. Prices remain above the $100.00 support area as the market consolidates. Reports that China is restarting refined-product exports have eased concerns about a severe supply shortage caused by Houthi attacks disrupting traffic through the Bab el-Mandeb Strait. Saudi Arabia’s ability to route shipments through Oman has also helped take some pressure off the market.
Fed Chair Kevin Warsh ignored Trump’s call for lower interest rates, and financial markets responded with an audible sigh of relief. Warsh made it clear that the White House does not set monetary policy and that restoring inflation to its mandated target remains his priority. Investors appeared to like what they heard.
Asian equity markets were mostly steady to firmer. Japan’s Topix and Australia’s ASX 200 finished virtually unchanged, while Hong Kong’s Hang Seng gained 0.60%.
At 7:30 am, Germany’s Dax has lost 0.85% while the French CAC-40 and the UK FTSE 100 ware down by 0.92%. S&P 500 futures are flat, the 10-year Treasury yield is 4.962% ,and the DXY is 100.47.
EURUSD traded in a 1.1473-1.1492 range and remained on the defensive as the Fed’s more hawkish stance revived expectations of another US rate increase before year-end. Some ECB officials repeated their hawkish rhetoric, but currency traders showed little interest. President Christine Lagarde also did little to silence speculation that she could step down before her term expires in October 2027. Asked about the possibility, her response was simply, “we’ll see.”
GBPUSD traded in a 1.3352-1.3376 range and remained pinned near its session low despite a much stronger-than-expected August Retail Sales report. Sales increased 0.5%, compared with expectations for a 0.2% decline and July’s 0.5% contraction. Sterling continues to feel the weight of the BoE’s decision to keep rates at 3.75% yesterday, particularly after both the Fed and ECB delivered rate increases.
USDJPY rallied in a 155.88-158.05 band and pushed higher toward its overnight high even though the Bank of Japan delivered its expected rate hike to 1.25%. Policymakers Asada and Sato, both appointed by Prime Minister Takaichi, had argued for leaving rates unchanged, raising fresh questions over how committed the BoJ is to further tightening.
AUDUSD traded in a 0.7108-0.7137 range and held onto its gains as improving risk sentiment provided support and USDCNH reached its strongest level in roughly four years. RBA Governor Bullock, meanwhile, repeated that bringing inflation back to target remains the central priority, with persistently high oil prices making that task more difficult.
Today, USD Industrial Production and Capacity Utilization are due but there are no top tier reports from Canada.
