The Canadian dollar extended Friday’s losses in a one-way move higher overnight. USD/CAD climbed steadily from 1.2708 to 1.2764 as FX traders bought U.S. dollars ahead of Wednesday’s Federal Open Market Committee meeting.
The FOMC meeting promises to be lively. The release of new projections, following somewhat hawkish comments by Fed Chair Jerome Powell has fueled talk of an early end to the tapering program and consequently higher interest rates sooner than expected.
Traders will focus on the "dot-plot" projections, despite Powell stating that they represent one man’s opinion, and not the committee as a whole. Analysts expect the dots which show two rate hikes in 2022, rather than just the one projected previously.
Today, Canada’s Finance Minister and the Bank of Canada hold a press conference to announce the renewal of the BoC’s inflation mandate. It is anti-climatic as the details were leaked last week. The inflation target will be unchanged at 2.0% but officials will now have to include a reference to employment conditions in their policy decisions.
Asia equity indexes closed with small gains following Friday’s S&P 500 record close. Japan’s Nikkei 225 rose 0.71%, while Australia’s ASX 200 gained 0.35%. European bourses are higher except the U.K. FTSE 100, which is flat, thanks to Omicron issues. Wall Street futures point to another positive open. Oil prices are modestly lower while gold firmed 0.21%. The U.S. 10-year Treasury yield is 1.475%.
EUR/USD is near the bottom of its $1.1261-$1.1318 range due to contrasting European Central Bank and FOMC monetary policy outlooks and bearish EUR/USD technicals. ECB policymaker Luis de Guindos tested positive for COIVD-19, which was really only an issue for him.
GBP/USD recouped most of its overnight losses, rising from $1.3223 to $1.3260 in Europe. The currency suffers from expectations for a dovish BoE policy meeting after the government imposed stricter regulations to combat the latest Omicron outbreak.
USD/JPY rallied from 113.28 to 113.72. The Tankan report was mixed. Non-manufacturing sentiment rose while Manufacturing sentiment was unchanged.
AUD/USD and NZD/USD tracked board U.S. dollar sentiment. AUD/USD recovered some of its Asia losses in early New York trading.
The U.S. and Canadian economic calendars are empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
