The Canadian dollar moved skyward following the U.S. Federal Open Market Committee meeting. The Fed left interest rates and quantitative easing (QE) unchanged, which was widely expected. The Fed did not shed any light on the start of tapering, but a statement tweak, highlighted below, suggests they are getting closer.
“Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings.”
It wasn’t enough for U.S. dollar bulls, and they sold bucks against the majors, with the Australian and New Zealand dollars leading the pack.
Canadian dollar traders ignored the weaker than expected domestic inflation data released yesterday.
Canada Consumer Price Index rose 0.3% m/m in June compared to the consensus forecast for a 0.4% m/m increase. The data is skewed as Statistics Canada updated the weightings to better account for spending habits during the pandemic era.
Nevertheless, the results downgraded near term inflations risks.
Overnight, the major Asian equity indexes rallied, helped by reports Chinese regulators were extolling the virtues of domestic capital markets, and saying they would allow Chines companies to go public. A 3.30% gain in Hong Kong’s Hang Seng Index led Asian equity indexes higher.
European bourses are also in positive territory, but gains have been modest. Wall Street is poised to open on a mixed note. DJIA futures have gained 0.30%, while S&P 500 futures are unchanged. Oil and gold prices rallied, and U.S. 10-year Treasury yields at 1.263% are above their 1.225% session low.
USD/CAD popped to $1.2600 when the FOMC statement was released then dropped steadily until finding a bottom at $1.2454 in Asia. The short-term technical outlook flipped to bearish with the move below support in the $1.2510-30 area, with a break below $1.2405 targeting $1.2305.
Today’s U.S. data includes weekly jobless claims and U.S. Q2 Gross Domestic Product. The GDP forecast is a robust 8.6%, which may reopen the debate that the economy has peaked.
Weekly jobless claims were expected at 380,000.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians