The FOMC meeting finished and it was not as doveish as expected. US interest rates rose by 0.25 percent as expected. The 2017 inflation forecast was lowered slightly while 2017 GDP growth was nudged higher. The surprise was that the Fed said they would start shrinking the balance sheet in 2017, although according to Chair Janet Yellen, the pace of reductions would be barely noticeable.
The US dollar opened in New York with a bit of a bid, having posted gains across the board. Those gains were extended following this morning US economic data releases. Initial Jobless Claims were better than forecast at 237,000. The Philadelphia Fed Manufacturing Index and the Empire Manufacturing index were higher than forecast.
EURUSD ticked lower from its opening level of 1.1160 to 1.1146 by 6:00 am PDT while USDJPY leapt to 110.36 from its opening rate of 109.76.
Sterling was very choppy. Weak May Retail Sales (Actual -1.2% vs. forecast -0.8%, m/m) drove GBPUSD from 1.2745 to 1.2695. Then surprising dissent at the bank of England policy meeting set GBPUSD from 1.2695 to 1.2792. The BoE voted 5-3 to keep rates unchanged, the widest divergence in 6 years. Those gains were pared back following the US data releases.
In Asia, Australia reported a 42,000 rise in employment and a drop in the unemployment rate to 5.5%. from 5.7%. AUDUSD rallied from 0.7584 to 0.7629. Broad US dollar strength reversed the move in Europe and AUDUSD dropped to pre-employment data levels by the New York open.
New Zealand Q1 GDP was 0.5% (forecast 0.7%, q/q). NZDUSD dropped from 0.7266 to 0.7210 which is where it was at the open this morning.
USDJPY bounced within a 109.28-109.80 range and opened in New York at 109.76, almost unchanged from the close
Oil prices consolidated in a $44.41-$44.78 range following yesterday’s plunge after the EIA Crude inventory report. The combination of concerns over Opec production cut compliance, rising US production and the risk of weaker global demand have put oil bears in charge.
USDCAD was in demand overnight and continued that way this morning. Price action is torn between soft oil prices and the hawkish shift by the Bank of Canada.
USDCAD Technical outlook:
The intraday USDCAD technicals are mildly bullish inside a downtrend from the June 9 peak of 1. 3523. A break above 1.3290 would lead to a test of the downtrend line which comes into play at 1.3360. A break above 1.3360 would extend gains to 1.3420. A move below 1.3240 suggests another test of 1.3160 support. For today, USDCAD support is at 1.3240, 1.3210 and 1.3180. Resistance is at 1.3290 and 1.3360.
Today’s Range 1.3240-1.3330