- FOMC minutes rekindle rate hike fears.
- US 10-year Treasury yield makes new cycle high.
- US dollar remains bid but opens mixed compared to close.
USDCAD: open: 1.3517-21, overnight range: 1.3504-1.3552, close 1.3532, WTI $79.77, Gold $1895.32
The Canadian dollar was battered following the release of the FOMC minutes, which suggested an increased risk of additional Fed rate hikes. It wasn't the only currency to suffer.
The US dollar rallied against all major G-10 currencies, and Wall Street closed with losses. Additionally, the US 10-year Treasury yield touched 4.30% overnight. Traders focused on a comment that stated, "most participants continued to see significant upside risks to inflation, which could necessitate further tightening of monetary policy."
The hawkish tone apparent in the FOMC minutes, combined with ongoing concerns about China's economic growth, led to a dampened risk sentiment overnight. Asian equity indices concluded in the red zone, primarily due to a 0.68% decline in the Australian ASX 200. European markets opened in negative terrain but are currently hovering near neutrality in early NY trading. S&P 500 futures show a slight upward trend.
The Canadian dollar did not receive any support from oil prices, as they declined to $78.97/b from $80.3. However, prices have since recovered, and WTI is trading at $80.13 in NY.
EURUSD traded narrowly in a 1.0862 to 1.0887 band overnight. Traders disregarded the news of Norway's Norges Bank implementing a 25 basis points rate hike, bringing the rate to 4.00%, as it was anticipated.
GBPUSD finds itself at the upper boundary of its 1.2703 to 1.2756 overnight range, making a complete recovery of losses incurred after the FOMC minutes. GBPUSD found support due to EURGBP selling and a hawkish outlook for the September Bank of England monetary policy meeting.
USDJPY traded in a 145.83 to 146.55 band, with the low occurring in early NY trading. The US 10-year Treasury yield hovering around 4.30% is limiting the downside, but gains are restrained due to concerns about FX intervention by the Bank of Japan.
AUDUSD traded with a bearish bias in a 0.6365 to 0.6426 range. Sentiment soured on news that Australia lost 14,600 jobs in July, and the unemployment rate jumped to 3.7% from 3.5%, which suggests that the RBA is done with hiking interest rates.
Today's US data release encompasses weekly jobless claims and the Philadelphia Fed Manufacturing Survey.
