Home Daily Commentaries The Greenback loses ground after the first day of Powell’s congressional testimony

The Greenback loses ground after the first day of Powell’s congressional testimony

Daily Currency Update

USD - United States DollarFederal Reserve Chairman Jerome Powell's speech yesterday was seen as a confirmation of a rate cut at the July 30-31 monetary policy meeting. He will continue with his second day of congressional testimony scheduled to begin at 10:00 am EST. Market participants are following this event closely to find evidence of a dovish bias. Some market participants, like Morgan Stanley, are looking to a 50-basis-point reduction in less than two weeks. The US dollar had fallen 0.10 percent at the time of this writing.In the US, according to the US Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in June on a seasonally adjusted basis (MoM), the same increase as in May. Over the last 12 months, the All Items Index increased 1.6 percent before seasonal adjustment. The CPI ex Food and Energy (YoY) came in at 2.1 percent in June versus the 2 percent expected, which was higher than in May.

Key Movers

A factor which might be influencing the USD/CAD pair to fall is the price of crude oil hitting a six-week high, close to USD$61 a barrel in the spot market as oil rigs in the Gulf of Mexico were evacuated ahead of a storm, and an incident with a British tanker in the Middle East heightened tensions with Iran.In Canada, the initial adverse reaction of the Loonie was likely due to a gloomy assessment of the economy’s near-term prospects. The BoC left the benchmark interest rate unchanged at 1.75 percent, as expected, but said recent economic strength is ambiguous and that it is payback for an awful winter that caused economic growth to nearly stall. Carolyn Wilkins, Senior Deputy Governor, said at the press conference in Ottawa, “While recent export data for Canada have been encouraging, the trade environment continues to be the biggest wild card in our outlook.” At the same time, the policymakers cut their forecast for economic growth in 2020 to 1.9 percent from 2.1 percent, which might not generate much inflation pressure.Despite the negative drivers described above, the Canadian economic data has been surprisingly strong. Statistics Canada reported that Canadian merchandise exports surged 4.6 percent in May and the BoC dropped housing from its shortlist of significant threats to the outlook.

Expected Ranges

  • USD/CAD: 1.3050 - 1.3138 ▼
  • EUR/USD: 1.1243 - 1.1281 ▲
  • GBP/USD: 1.2510 - 1.2585 ▲
  • AUD/USD: 0.6961 - 0.6994 ▲
  • NZD/USD: 0.6657 - 0.6699 ▲