FOMC Minutes has the Market Pricing in another Rate Hike from the Fed In December

Key Movers

The Canadian Dollar is weaker this morning when valued against the US Dollar. The USD/CAD pair slumped after the release of dismal retail sales data. Following a 2.2% increase in May, retail sales edged down 0.2% in June to $50.7 billion. Sales were down in 6 of 11 subsectors, representing 52% of total retail trade.


Moving forward into the week, the domestic economic calendar remains light with the focus squarely placed on on-going US-China trade talks that are slated to start today.



From a technical perspective, the USD/CAD pair is currently trading at 1.3071. We continue to expect support to hold on moves approaching 1.3029 and 1.2987 while now any upward push will likely meet resistance around 1.3114.


The Euro continued its upward trajectory, posting modest gains in overnight trading. Opening this morning at 1.1561 against the US Dollar, the Euro looks relatively reactionary at present, turning to its counterpart for direction. Domestically, the economic calendar remains light-on.


The biggest news to impact the Euro was President Trump’s announcement that he would slap a 25% tariff on all cars from the European Union. Immediately the market responded with a small decline to kick off the session. Fortunes improved for the Euro however when the FOMC released their meeting minutes. The primary focus was that the September rate hike is almost 100% priced in, even as the FOMC has significant concerns on trade disruptions. The market responded to the meeting minutes negatively, with the USD marginally falling across the board. Overall, it was a day of limited movements, and trading conditions continued to be light.


The Great British Pound edged marginally higher through trade on Wednesday, consolidating early week gains and maintaining a tight trading handle for much of the day. Having broken back below 1.29 in the European session the pound relinquished the gains it made yesterday touching a two-week high of 1.2935.




After making new 14 month lows, last Wednesday Sterling has found support breaking a six week run of losses on broader USD weakness and an uptick in Brexit optimism. British and EU officials commenced fresh talks this week sparking renewed hope the next deadline will reach an agreement in October. While mixed messages are filtering through with EU officials are skeptical the original divorce date will be met. British Brexit ministers are confident a deal can be negotiated sparking near-term optimism and driving short-term support. Said gains are highly conditional to the ongoing Brexit upside and the pound remains vulnerable to a sudden shift in confidence.


With little of note on the macroeconomic docket out focused remains with the Brexit narrative. A key driver through this week and the short term will be the release of a report from the May government that analyses the consequences of a “NO DEAL” Brexit. The report is due before the end of the week. Watch resistance on moves approaching 1.30 and support at last weeks 14 month low.


The Australian Dollar moved within a 20-pip range on Wednesday between levels of 0.7350 and 0.7370 and despite the Australian Bureau of Statistics released the official constriction work done figures showing a 1.6 percent rise in the June quarter the Aussie didn’t budge. Total building work on homes was up 3.1 percent in the three months, while work on non-residential buildings grew by a more modest 1.3 percent.


Meanwhile, at the Economic Society of Australia Business Luncheon in Brisbane, Deputy Governor Debelle said in a speech he expected inflation to remain around 2.25% at least for the next couple of years. Despite the fact that all of the US news coverage regarding former Trump campaign manager and the former Presidents lawyer the Greenback hasn’t been affected, it has remained well supported as the Fed Minutes confirmed they stay on track for a hike next month.



There is no local data due out today, and investors will be keenly attuned to the annual Jackson Hole gathering where in attendance will be central bankers, finance ministers, academics, and financial market participants from around the world


The New Zealand Dollar traded in a relatively muted sideways pattern yesterday, maintaining a forty-point range over the past twenty-four hours. Opening the morning below the US 67 cent handle, the Kiwi was initially bolstered by a bullish retail sales reading for the 2nd quarter of 2018.



The seasonally adjusted reading of 1.1%, was a full 0.8% higher than the previous quarter, showing a more robust outlook for the local economy and pushed the NZD to a two-week high of 0.6718. The Core retail sales reading which excludes vehicle and fuel categories also showed a steady reading of 1.4% versus a forecast of 0.8% and points towards a stronger print for GDP figures due for release on September 20th.


Looking forward to tomorrow, market participants look toward the release of Julys Trade Balance figures as the New Zealand dollar currently swaps hands at 0.6700.