The U.S. Dollar is trading in mostly weaker ranges to start a pivotal day from the guidance of future monetary policy.
Overview
The U.S. Dollar is trading in mostly weaker ranges to start a pivotal day from the guidance of future monetary policy. Indeed, the Federal Reserve will announce its decision later today at 2 PM, followed by a press conference from Chairman Jerome Powell. While everyone anticipates a pause, the substance will certainly be in the details about where officials see themselves agreeing on down the line.
Expect questions over the Dot Plot and how much longer interest rates will stay at record highs. While there is uncertainty, equity markets are shooting for a somewhat dovish take that will mean cuts to borrowing costs instead of hikes as seen fit. Investors and traders mostly think the next year will bring on an accommodative environment but wonder about recessionary pressures developing unevenly by regions. This keeps FX flowing all over the place.
As of this moment, odds of a Fed hike for the remainder of the year are low with November at 29.0% and December at just 15.0%. There is a 50.0% chance that the Fed starts cutting by end of July next summer. While central bank action keeps taking center stage with Bank of England meeting tomorrow as well as Bank of Canada Minutes from their last meeting later today, key economic releases will be the main feature for Japan, the U.S. and Euro-zone to close out the week.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
EUR ⇑
The Euro has gradually returned to gains, primarily entering into green territory based on advances in inflation in the form of the Producer Price Index in both Spain and Germany. PPI for both nations had significantly dropped, as low as (-1.1%) in July, but managed to claw back significantly as figures showed a return to price growth of 0.3% in August. In comparison to the U.S., the Europeans have struggled more in bringing down inflation by being unable to return to a balance between supply and demand. We will get Consumer Confidence for the entire Eurozone tomorrow, while the Purchasing Managers Index comes out Friday.
CAD ⇑
The Canadian Dollar is slowly improving ahead of the Fed meeting, but also its Bank of Canada Minutes released at 1:30 PM. The “Loonie” has weakened by 2.5% since mid-July as economic indicators have revealed a stagnant period for our neighbor. We see better times ahead, as per our note earlier this week.
