Home Daily Commentaries DXY maintains rebound ahead of Fed decision

DXY maintains rebound ahead of Fed decision

Daily Currency Update

The US dollar index (DXY) continues its upward trend of the week today, trading at 100.97, up from yesterday’s close of 100.829. The USD is making further gains against the JPY today, trading at 141.230. Reversely, the USD/CAD pair continues its downward trend, and a new 2023 low may be in the cards. The bearish trend starting in March 2023 remains dominant for this currency pair. At the time of writing, the USD/CAD is trading just a tad above the 2023 low at 1.32089. Some forecasters who were anticipating a recession are hedging their bets as inflation draws back and the US economy remains resilient. The general market consensus sways back and forth between a recession. All eyes will be on the Federal Reserve’s rate decision next week.

Key Movers

The JPY’s slide against USD comes after reports that the Bank of Japan (BoJ) is leaning towards keeping its key yield control policy unchanged next week ahead of a conglomerate of Central bank meetings, including the European Central Bank (ECB) and the Federal Reserve. Reports say Japan is aiming to ensure wages and inflation keep rising before changing its policy.

The EUR/USD pair is keeping its range below 1.1150, staying on the defensive ahead of next week’s ECB and Fed decisions.

UK retail sales month-over-month are higher than the forecasted 0.2% coming in at 0.7%. Increases were seen across all major sectors except for automotive fuel. The uptick in consumer spending continues despite Britain’s current high inflation rate. The UK’s public sector net borrowing data, excluding public sector banks, in June was GBP 18.5 billion, GBP 0.4 billion less than June 2022 and the third-highest June borrowing since records began in 1993. Higher tax receipts and a substantial fall in debt interest compared to 2022 were offset by increased benefit payments and other costs.

Canadian Core Retail Sales month-over-month data was unchanged in May, lower than the forecasted 0.2% rise. A flat report isn’t a big red flag as core sales rose for five consecutive months prior to this. However, this may be a sign that higher interest rates are beginning to take their toll. Canadian Monthly Retail Sales data came in at 0.2% in May, below the expected 0.5%. This could be a further indication that Canada is tightening its purse strings, though this figure includes the highly volatile automotive industry as well. The New Housing Price Index data release showed an increase of 0.1%, marginally higher than the expected flat data. Increases in the selling price of new homes could be good for the CAD as it attracts investors and spurs industry activity. In oil news, West Texas Intermediate (WTI) oil is up today to 76.21 from yesterday’s close of 75.67.

Expected Ranges

  • EUR/USD: 1.11172 - 1.11449 ▲
  • GBP/USD: 1.28157 - 1.29041 ▼
  • AUD/USD: 0.67316 - 0.67878 ▼
  • USD/CAD: 1.31529 - 1.32116 ▲