September 19, 2024
- Fed’s 50 bp rate cut roils markets
- Bank of England keeps rates unchanged at 5.0%
- US dollar consolidating losses.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3538, overnight range 1.3533-1.3648, previous close 1.3605
USDCAD rallied in the aftermath of the Fed’s 50 bp rate cut but the gains were reversed overnight due to broad US dollar selling pressures. Even so, the Canadian dollar’s performance against the US dollar lagged that of the other commodity currencies, NZD and AUD and that’s because the Bank of Canada may match the Fed rate cut at its October 23 meeting.
The CAD/US 10 and 2-year interest rate spreads did not narrow that much following the Fed rate cut and that may limit USDCAD gains today. In addition, $1.2 billion of 1.3590-00 option expiries may limit gains today.
Oil prices traded firmer in a 69.16-71.01 range due to rising Middle East tensions after Iran threatened to retaliate against Israel. However, Iranian officials did not communicate the message over pager or walkie-talking, preferring to keep their body parts attached.
USDCAD technicals
The intraday USDCAD technical are bearish below 1.3610 and looking for a break of 1.3540 for a test of support at 1.3440. However, the 4 hour chart suggests the USDCAD technicals are bullish above 1.3540, inside a 1.3440-1.3620 range.
Longer term the USDCAD 200 day moving average in the 1.3585 area is acting as a pivot while the 100 day moving average at 1.3685 caps gains.
For today, USDCAD support is at 1.3540 and 1.3510. Resistance is at 1.3590 and 1.3620.
Today’s Range 1.3510-1.3610
Chart: USDCAD 4 hour
Source: Investing.com
“Take a Bow Jay”
“Take a bow, Jay. Come to center stage, but not for applause and appreciation from your audience, but to pay homage to the “Masters of the Universe (bond traders), whose aggressive trading strategies forced your hand. The bond market has long been pricing in significant rate cuts, and when the Fed delivered a 50 basis point reduction, it may have been to short-circuit claims that the Fed is behind the curve. Today’s US weekly jobless claims data suggests the Fed is not behind the curve. Jobless Claims fell 12,000 to 219,000 from the upwardly revised 231,000 last week. The Philadelphia Fed Manufacturing Survey was mixed but the indicator for general activity turned positive.
Greenback Pressure Eases.
The US dollar traded erratically following the FOMC decision, but now that the dust has settled, the attention turns to the next two meetings and the size of the cuts expected. The CME Fed Watch Tool odds are better than 68.0% for at least another 75 bps in cuts. S&P 500 Futures are up 1.65%. Gold (XAUUSD) peaked at $2,594.00.
Global Equities Soar
Wall Street closed with losses, which was probably due to profit-taking after the FOMC decision. Asian traders were elated, and Japan’s Topix index, which rose 2.0%, led the other indices higher. European bourses joined the rally party, and the front-runner is the French CAC 40 index, which is up 1.93%.
EURUSD
EURUSD churned in a post-FOMC 1.1098-1.1192 range before closing at 1.1119. The single currency fell to 1.1069 in Asia before traders turned their attention to the risk of another 75 bps in Fed cuts before year-end and drove EURUSD to 1.1179 just before NY opened.
GBPUSD
GBPUSD spiked to 1.3299 after the Fed rate cut, then jumped to 1.3314 when the Bank of England left rates where they were. It was expected but the aggressive Fed stance coupled with a cautious BoE is supporting prices. A sustained break above 1.3300 targets 1.3450.
USDJPY
USDJPY got slammed then soared post-FOMC, falling to 140.45 on the heels of the 50 bp rate cut, then spiked up to 143.95 in Asia. The Fed action was largely expected, and the focus has shifted to Friday’s BoJ meeting, where rates are expected to remain unchanged.
AUDUSD and NZDUSD
AUDUSD rallied from an overnight low of 0.6737 to 0.6838 following a strong labour market report that was far more robust than expected. Australia added 47,500 new jobs, but 50,600 were part-time. However, the participation rate remained steady, and the result is that the RBA will not be in any hurry to cut rates.
NZDUSD traded erratically post-FOMC, spiking to 0.6269 then falling to 0.6181 in Asia. GDP data was stronger than expected, falling just 0.2%, rather than 0.4% as expected, which underpinned prices. The results highlight a soft economy, but RBNZ rate cuts will be less aggressive than the Fed’s.
USDMXN
USDMXN plunged to 19.1440 from 19.3880 in the wake of the Fed decision, bounced back to 19.3134 in Asia before slowly sliding lower to 19.1711 in early NY, which is still higher than yesterday’s open. Prices have been moving higher since, and ongoing concerns about judicial reforms leave the uptrend intact above 18.8500.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.0983 vs exp. 7.0924 (prev. 7.0870)
Shanghai Shenzhen CS! 300 rose 0.79% to 3196.04
Chart: USDCNY and USDCNH
Source: Investing.com
