Bank of England leaves monetary policy unchanged, warns of higher inflation
Fed officials rejuvenate taper talk
FX traders ignore as expected US jobless claims
USDCAD open 1.2511-15, Overnight Range 1.2503-1.2546, Previous close 1.2542
FX at a Glance:
FX Recap and outlook
Weekly US jobless claims were 385,000, as expected and last week’s results were reduced to 399,000. No one cared. Traders are focused on Friday’s US employment report in light of recent comments from Fed officials.
Yesterday, Fed Vice Chair Richard Clarida had a slightly more hawkish take on the US economic outlook than what was expected. He agreed with Chair Powell’s view that the Fed was “a ways away from considering raising interest rates.” Then he said if his outlook for inflation and employment is realized, the “necessary conditions for raising the target range for the federal funds rate will have been met by year-end 2022.”
That comment raised a few eyebrows and drove the DJIA and S&P 500 indexes lower, undermined gold prices while boosting the US dollar and Treasury yields.
Dallas Fed President Robert Kaplan suggested starting tapering if the July and August job numbers “continue to make progress.”
COVID-19 issues, especially in Asia, continue to undermine risk sentiment. Beijing announced plans to quarantine visitors from high-risk areas, and Japan is contemplating expanding COVID-19 restrictions. Australia is already under draconian restrictions.
The US dollar held on to most of yesterday’s gains in an extremely drab overnight session. Top-tier economic data were in short supply, leaving FX traders to seek guidance elsewhere. Unfortunately, they didn’t find it and the greenback traded sideways against most of the G-10 majors. The exception was GBPUSD which recouped a large portion of yesterdays losses.
EURUSD traded sideways in a 1.1829-1.1849 range. The ECB Economic Bulletin did not create any interest. The bulletin reiterated that “there is still a long way to go before the damage to the economy caused by the pandemic is offset”.
GBPUSD climbed from 1.3874 to 1.3945. The Bank of England left monetary policy unchanged as expected. They warned of ongoing inflation pressures and said growth economic growth would slow in Q3.
USDJPY drifted lower in a 109.48-109.74 range. Domestic coronavirus issues and soft 10-year Treasury yields weigh on prices.
AUDUSD managed to climb to 0.7378 to 0.7410 despite new covid-19 lockdown restrictions imposed in New South Wales. Prices garnered a bit of support from news Australia’s trade surplus widened to $10.46 billion in June. NZDUSD tracked AUDUSD higher.
USDCAD drifted down from 1.2546 to 1.2503, on the back of the rising antipodean currencies, while traders ignored a slide WTI oil from $68.80/barrel to $67.64. Oil prices are getting hammered by a combination of rising US crude inventories, increased Opec production, and fears of another global growth slowdown. However, tensions in the Middle East are acting as a downside brake.
USDCAD technical outlook
The intraday USDCAD technicals are bullish above 1.2500, which guards the base of the June uptrend channel at 1.2420. A break above 1.2550 targets 1.2610, while below 1.2500 risks a test of support at 1.2420 For today, USDCAD support is at 1.2500 and 1.2480. Resistance is at 1.2550 and 1.2610. Today’s range 1.2490-1.2550
Chart USDCAD daily
Source: Saxo Bank
FX open, high, low, previous close
Source: Saxo Bank