- Global growth outlook cut by IMF
- Bank of England reconfirms plans to end bond support.
- US dollar opens modestly lower compared to Tuesday
USDCAD snapshot: open 1.3770-74, overnight range 1.3762-1.3823, close 1.3796, WTI $89.56, Gold $1670.04
The Canadian dollar rode a rollercoaster yesterday as USDCAD fell from 1.3854 to 1.3714, then rebounded to 1.3820 just before closing at 1.3796. The overnight session wasn’t nearly as volatile with traders cautious ahead of today’s US PPI data and the release of the FOMC minutes.
The FOMC minutes from the September 21 monetary policy meeting should not cause much of a stir unless they reveal a sharp divide in guesses for the terminal rate level. A number of Fed officials have reaffirmed the need for higher US interest rates in the past two weeks.
Yesterday Cleveland Fed President Loretta Mester said the Fed has not made much, if any progress in lowering inflation and that policy needs to move to restrictive levels. She said the biggest policy risk is if the Fed does not hike enough.
IMF economists are warning of a deeper global economic slowdown and chopped their 2022 global growth forecast to 2.7% from 2.9%. The IMF said the cut was due to rising interest rates in developed markets, slower than expected growth in China, and the fall-out from the Russian invasion of Ukraine.
Bank of England Governor Andrew Bailey triggered a steep drop in US equities while boosting the 120 -year Treasury yield to just below 4.0%. The Governor said that UK portfolio managers should make sure they have rebalanced their positions because the emergency gilt (bond) buying program would end on Friday.
Today, the UK Financial Times had a headline reading “BoE signals to lenders it is prepared to prolong bond purchases.” The article said that unnamed BoE officials signalled to lenders that it would extend the program if market conditions demanded it.
The BoE quickly denied the story and reiterated that the bond support program would end October 14 as scheduled
GBPUSD churned in a 1.0925-1.1098 range and trades at 1.1058 in NY. Prices are getting a bit of support from comments by BoE Chief Economist Huw Pill suggesting the need for a “significant” rise in interest rates.
EURUSD traded in a 0.9683-0.9734 range with traders cautious ahead of the FOMC minutes.
USDJPY rallied from 1.45.61 to 146.62 on the back of rising US Treasury yields. The 10-year Treasury yield rose from 3.90% to 3.97%.
AUDUSD and NZDUSD traded with a negative bias in narrow ranges.
Today’s US data includes September PPI
