Home Daily Commentaries Fed Chair Jerome Powell to speak on employment and inflation at 12:45PM EST

Fed Chair Jerome Powell to speak on employment and inflation at 12:45PM EST

Daily Currency Update

The market has reacted positively to the new and improved NAFTA deal (USMCA) being completed by the Sept 30th deadline. Following the news of USMCA deal being completed, Trump sounded very proud and content during his speech on the outcome of the NAFTA negotiations.

On the data front, we had the release of ISM Manufacturing PMI yesterday, which came in at 59.8 vs 60.1 expectations and was slightly lower than the previous month of 61.3. Today we will have Fed Chair Jerome Powell speak regarding the outlook for employment and inflation at the National Association for Business Economics Annual Meeting in Boston at 12:45PM EST.

Key Movers

The Loonie is holding onto its gains from yesterday’s report of the new NAFTA trade deal (USMCA) being completed before the Sept 30th midnight deadline. During overnight trading, the Loonie did strengthen against most of its other G10 peers as oil prices continue to climb and reach new highs (75.91), which we haven’t seen since November 2014.

With NAFTA uncertainties out of the picture this will help Bank of Canada have more clarity for future decisions based on the domestic economic outlook. This week the Loonie is expected to trade based on oil prices and following economic data release: Thursday 10AM EST – Ivey PMI, Friday 8:30AM EST – Employment Change, Trade Balance, Unemployment Rate.

The EUR continues to trade slower today as focus remains on Italy. The clash between Rome and Brussels on fiscal policy continues to have a negative impact on the EUR as it rise concerns over Italy’s sovereign rating and its threat for the markets. Furthermore, the widening Eurozone-US interest rate differential should continue to weigh down on the EUR. Short term technical indicators are mostly bearish.

It’s all about Brexit right now, and it’s going to be all about Brexit for a while yet. Moreover, the Tory conference will be at the forefront of traders’ minds. May has been on the wires in the last few hours saying that they will bring forward proposals on customs and regulations for the Irish border issue. Sounding a bit like a broken record now, but it’s headlines like this that continue to have an impact on currency markets. Nationwide House Price Index in September printed better than expected at 0.3% m/m and 2.0% y/y. UK Construction PMI in September disappointed and printed at 52.1 while expectations was for 52.9.

In an unsurprising move last night, the RBA left interest rates on hold and made few changes to its accompanying statement. However, they did remove the reference to a headline inflation forecast of 1.75% and made mention to rising mortgage rates as being a minor issue. It ultimately failed to have an impact on the Aussie dollar.

What has had an impact on the AUD/USD is the attitude to risk in Europe this morning. In fact, it started in the Asian session with equities getting off to a rotten start following the public holidays in China and Hong Kong. AUD/USD has since fallen under .72 and opens in London at .7190.

Looking ahead for the week, we have Aussie trade balance numbers and Retail Sales figures.

Unable to keep pace with a stronger Greenback overnight the New Zealand Dollar has fallen when valued against the worlds reserve currency. NZD/USD fell overnight as NZIER QSBO, a business confidence measure, showed that business confidence fell in Q3. It recovered, of sorts, but has since dropped in line with the sell-off in risk. It slipped below .6600 in early European trade and opens this morning at .6585.

Expected Ranges

  • USD/CAD: 1.2800 - 1.2841 ▲
  • EUR/USD: 1.1505 - 1.1580 ▼
  • GBP/USD: 1.2941 - 1.3053 ▼
  • AUD/USD: 0.7162 - 0.7238 ▼
  • NZD/USD: 0.6575 - 0.6616 ▼