Who will be the next Chair of the Federal Reserve? Janet Yellen’s first term ends at the end of January 2018. If she steps down or is not reappointed, she will be the first one-term Fed Chair since G. William Miller who was replaced by Paul Volcker in 1978.
There hasn’t been much in the way of quality US data, so traders decided to fret about Fed succession possibilities, assuming Ms Yellen was not in the running.
Yesterday, Political.com reported that Kevin Warsh, former Fed board members and Jerome Powell, were the front runner’s to replace Ms Yellen. The article said Treasury Secretary Mnuchin preferred Powell.
“Idle hands are tools of the devil,” and slow news days are the idle hands of FX markets.
The Fed succession rumours led to broad US dollar selling, overnight.
AUDUSD and NZDUSD rallied from the Asia open. AUDUSD climbed from 0.7832 to 0.7873 then traded sideways in Europe. NZDUSD rallied from 0.7149 to 0.7204, but the lingering negative sentiment from Tuesdays weak GlobalDairyTrade auction capped gains.
The Fed rumours took the steam of the USDJPY rally as well. Prices declined from 112.89 to 112.42 and opened in New York near the bottom.
EURUSD had a bid tone. Eurozone economic data was mixed. September Markit Services PMI was a tad higher than forecast (Actual 55.8 vs forecast 55.6) while Retails sales missed. (Actual -0.5% vs forecast 0.3%, m/m). The government of Span’s reaction to the Catalonia issue continued to weigh on the single currency.
Sterling is off its overnight low of 1.3236 and is trading at 1.3284, supported by the broad US dollar weakness, better than expected Markit Services PMI Actual 53.6 vs forecast 53.2) and hopes of a unifying speech by UK PM Theresa May, later today.
Oil prices continued to slide overnight. WTI dropped from $50.39 to $49.94 despite Tuesday’s API weekly crude stocks change report showing a 4 .08 million barrel decline. That’s because gasoline inventories rose.
USDCAD dropped on the back of the broad dollar weakness and the drop in crude prices.
ISM Non-manufacturing PMI is on tap (forecast 55.5). Fed Chair Yellen is speaking as well. She is not expected to talk about monetary policy.
USDCAD Technical outlook:
The intraday USDCAD technicals are bearish while trading below 1.2495-05, looking for a break of support in the 1.2440-60 area to extend losses to 1.2410. A break of 1.2410 suggests further downside to 1.2310. However, the uptrend line from September 15 remains intact while prices are above the 1.2450-60 area. A break above 1.2510 will put the focus on resistance in the 1.2530-50 area.
Today’s Range 1.2440-1.2510
Chart: USDCAD 1 hour