USD flat ahead of Wednesday’s Fed announcement

Key Movers

The EUR/USD pair held above the 1.0650 mark after last week’s bearish action. It is going to be a relatively quiet week for Eurozone data and events with the implications of last week’s hike and subsequent decline for the EUR still visible in the market.

The GBP/USD briefly rose above 1.24 this morning but continued to remain soft during the current trading session. Markets expect another rate hike from the Bank of England (BoE) on Thursday with a 20% chance of a pause.

China’s central bank met with foreign institutions including JP Morgan, HSBC, Deutsche Bank, and Tesla today. China has been seeking to attract foreign investment to support its recovery. Foreign investment into China has dropped 5.1% year-over-year so far in 2023.

The Canadian dollar made limited gains amid rising oil prices and a steady US dollar. Oil broke a new yearly high of $92/barrel today. The supply deficit could grow even larger if demand from China starts to pick up. In Canadian data, housing starts were flat in August reporting at 253,000 versus the 255,000 seen in July. This is also below the expected 257,000 housing starts. The Industrial Product Price Index, which shows prices of products manufactured in Canada, rose 1.3% in August. This was better than the 0.5% forecasted figure and the previous rise of 0.4%. The Raw Materials Price Index (RMPI), which shows the prices of raw materials purchased by manufacturers, increased by 3% in August with crude energy products leading the increase. Excluding crude energy, the RMPI rose just 0.2% month-over-month.