Daily Currency Update

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The Greenback is choppy following funding issues that drove up borrowing costs and as we await the Fed announcement later today

USD - United States Dollar

The U.S. dollar index decreased by around 0.38 percent yesterday after the Fed addressed the dollar funding issue by performing a generous repo operation for $ 53 billion. Right now, expectations are for the Fed to announce the expansion of their balance sheet to address the situation that weighed on the dollar. In simple terms, the Federal Reserve took action to calm money markets on Tuesday, injecting billions of dollars in cash to suppress a surge in short-term interest rates that was pushing up its policy benchmark rate and threatening to drive up borrowing costs for companies and consumers. The Fed said it would do this again on Wednesday. At this moment, the U.S. dollar index is increasing 0.17 percent.

Later today, at 2:00 pm EST, the Fed is likely to be cautious. Market participants are pricing a 25 basis points cut, but they are also are expecting a dovish tilt. The Fed will probably reflect a less upbeat view on employment consumer sentiment. According to BofAML, Powell is likely to refrain from describing this as a mid-cycle adjustment to help alleviate the funding stress.

Key Movers

According to Statistics Canada, the Consumer Price Index in Canada rose 1.9 percent on a year-over-year basis in August, down from a 2.0 percent increase in July. This was primarily due to lower gasoline prices. Excluding gasoline, the CPI rose 2.4 percent, matching the increase in July. The CPI has grown by 1.9 percent or more on a year-over-year basis for six consecutive months, after reaching a low of 1.4 percent in January of this year. The broad-based gains in the CPI over the past two quarters have coincided with strength in Canadian labour market conditions. However, the USD/CAD has not moved lower; it has remained relatively flat over the last hour since the release of the CPI numbers. It is trading at 1.3255 at the time of this writing.

Expected Ranges

USD/CAD: 1.3231 - 1.3269 ▲

EUR/USD: 1.1033- 1.1077 ▼

GBP/USD: 1.2440 - 1.2497 ▼

AUD/USD: 0.6828 - 0.6863 ▼

NZD/USD: 0.6322 - 0.6355 ▼