- Fed’s beige book finds US election a concern
- Bank of Canada keeps interest rates on hold
- The focus will be ECB press conference at 13:30 GMT
Overnight the Fed’s beige book, a snapshot of the general health of the US economy was released. Broadly speaking it showed an economy that is struggling to continue momentum with many citing uncertainty over the US election in November as a new concern for holding back with investment. Comments from Fed speakers this week have been consistent with resuming the rate hike process sooner rather than later although with the data becoming more mixed, markets are reluctant to aggressively price in imminent rate hikes. The pre-FOMC blackout begins next Tuesday so traders will be watching for any clues from speeches and interviews due over the next few days. For now the US Dollar should remain range bound.
The Australian Dollar rose a touch overnight as trade data showed that the trade deficit had narrowed sharply. Figures showed that the deficit in July fell by 26% to AUD 840 million against an expectation of AUD 2.8 billion. The largest contribution came from gold exports which is always volatile. Elsewhere, the news was not so good with iron ore and coal exports both falling. Traders looked past the headline figure which probably explains the muted reaction. Yesterday the Bank of Canada kept interest rates on hold at 0.5%. Governor Stephen Polz said that underlying economic conditions don't warrant a change in policy at this time and stood firm with the BoC's decision.
The highlight of the day will be the European Central Bank meeting and the market is anticipating some form of extension of quantitative easing. There has been some chatter around an expansion in the type of bonds that they would be able to purchase. They may also be tempted to extend the end date by another six months to September 2017. Some form of easing is expected so it would be a surprise if they did nothing and the Euro could find some support. Unless something radical is announced, it is unlikely that we will see a breakout form the summer range in EURUSD of 1.10 – 1.1370.
The ECB will undoubtedly be the focus this afternoon however if that passes without incident, attention will once again turn to the US and interest rate hike expectations.
Thou shalt not weigh more than the refrigerator
A clear conscience is usually the sign of a bad memory
Always yield of temptation, because it may not pass your way again
A balanced diet is a cookie in each hand
Today's Major Economic Releases
||Canada: Building permits m/m
||Canada: Capacity utilization rate
||ECB press conference
||US: Unemployment claims
||US: Crude oil inventories
FX research by Ricky Nelson
Daily Currency Analysis by William Busby
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