USD/CAD Open: 1.3805-09, Overnight Range: 1.3806-1.3861, Previous Close: 1.3858
WTI Oil open at $81.70 and gold open at $1,988.54. US markets are higher today.
For today, USD resistance is at 1.3805. Support is at 1.3709.
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The Canadian dollar stepped back from the brink on the heels of the FOMC monetary policy meeting yesterday afternoon. USDCAD dropped from 1.3900 pre-Fed to 1.3806 overnight.
The Fed did not surprise anyone when it left the benchmark overnight rate unchanged at 5.50%, and no one was surprised when Fed Chair Jerome Powell left the door open to another rate hike. After all, the dot-plot projections in September’s Summary of Economic Projections (SEP) implied as much.
The surprise occurred due to what at first glance was an innocuous tweak to the statement, and later on, Mr. Powell’s dismissal of the SEP interest rate projections. In September, the statement read, in part, “Tighter credit conditions for households and businesses are likely to weigh on economic activity.” Yesterday’s statement started with “Tighter financial and credit…,” which to many meant that the recent rise in Treasury yields precluded the Fed from needing to raise rates any higher.
The Canadian dollar is not out of the woods yet. The Canadian economy is in, or close to, a recession, while the US economy is far more robust. US and Canadian interest rate differentials and a lack of upward movement in oil prices will act as a drag on Canadian dollar gains.
EUR/USD surged following the Fed decision and is trading at the higher end of its 1.0567-1.0633 range in the early New York session. This upward momentum came despite another disappointing Eurozone Manufacturing PMI report, which showed a reading of 43.1 compared to a previous and expected 43. The HCOB noted that the manufacturing sector in the Eurozone continues to face significant challenges, with marked decreases in new orders, purchasing activities, and backlogs leading to a substantial drop in factory production.
GBP/USD traded in a 1.213-1.2197 range ahead of the Bank of England decision. They are expected to leave rates unchanged at 5.25%, while saying that monetary policy will remain restrictive until inflation returns to target. The statement is released at 8:00 a.m.
USD/JPY retreated in a 150.15-150.97 range as plunging US Treasury yields and a general weakening of the US dollar weighed on prices.
AUD/USD rose from 0.6389 to 0.6447, fueled by optimism that a halt in the Federal Reserve’s rate hikes could bolster global growth and increase commodity demand. The drop in Australia’s trade surplus from AUD 10.161 billion in August to AUD 6.78 billion was not a factor.
US weekly jobless claims and factory orders data are ahead.
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