- Hawkish FOMC minutes to stale to matter.
- S&P 500 futures trading higher suggesting positive open on Wall Street
- US dollar opens mixed but trading defensively in early action.
USDCAD snapshot open 1.35209-33, overnight range 1.3520-1.3551, close 1.3552, WTI $74.63, Gold $1826.86
The Canadian dollar dropped in the initial reaction to the release of the FOMC minutes yesterday.
The minutes supported arguments from both rate hawks and doves.
Rate hawks took note of the minutes showing that policymakers are committed to further rate hikes. Rate doves focused on the pushback against 50 bp rate increases.
The prospect of a series of 25 bp hikes that lift the fed funds rate to 5.50% won the day for the hawkish camp. The US dollar rallied while commodity prices and stocks fell although the magnitude of the moves was underwhelming.
When the dust settle, traders realized that the minutes were too stale to matter. A series of robust US economic reports released after the February 1 meeting changed the landscape.
FX markets were rather subdued overnight, and the US dollar opened mixed against the G-10 majors. The Canadian dollar is trading defensively, weighed down by lower oil prices and a dovish Bank of Canada monetary policy outlook.
The Bank of Canada has put further rate hikes on hold in contrast with the Fed, which plans two or three 25 bp rate bumps.
WTI oil traded negatively Wednesday, falling from $76.23/b to finish the day at $73.87/b after the American Petroleum Institute reported crude inventories rose 9.895 million barrels last week, which is on top of the 10.5-million-barrel gain in the previous week. US dollar strength, post-FOMC minutes was another factor.
EURUSD traded in a 1.0587-1.0627 range, rising in Asia, and hitting the bottom in Europe. The drop occurred despite headline and core inflation being revised higher to 8.6% y/y (previous 8.5%) and 5.3% y/y (previous 5.2%) respectively.
GBPUSD mirrored EURUSD price action in a 1.2016-1.2074 range. Bank of England policymaker and noted hawk, Catherine Mann said the UK needs more interest rate hikes. She warned that failing to do enough to combat inflation now, means higher rates for longer. GBPUSD has support at 1.2000.
USDJPY traded narrowly in a 134.72-134.99 range. Traders are nervous ahead of testimony from BoJ governor-nominee Kazuo Ueda at his nomination hearing Friday.
AUDUSD rose in a 0.6805-0.6841 supported by the believe the RBA will raise rates.
Today’s US data includes Q4 GDP, Weekly Jobless Claims, and the Chicago Fed National Activity Index.
