Canadian Dollar consolidates vs USD as traders keenly await BoC/FOMC rate decisions

USD/CAD struggles to capitalize on the overnight recovery gains amid a combination of diverging forces.
The US-Iran statement benefits the safe-haven USD, while bullish Crude Oil prices underpin the Loonie.
Traders also seem reluctant and opt to move to the sidelines ahead of the crucial BoC/FOMC decisions.

Haresh Menghani FXStreet

The USD/CAD pair seesaws between tepid gains/minor losses, below the 1.3700 mark, during the Asian session on Wednesday amid a combination of diverging forces. The lack of progress in US-Iran peace talks continues to benefit the US Dollar's (USD) reserve currency status and supports spot prices. However, bullish Crude Oil prices underpin the commodity-linked Loonie and cap the upside for the currency pair.

Hopes for a revival of US-Iran peace talks receded after US President Donald Trump canceled his special envoy's planned visit to Pakistan. Furthermore, media reports suggest that Trump was dissatisfied with Iran's new proposal on resolving the war and reopening the strategic waterway, but would set ‌aside discussion of Iran's nuclear program. This keeps geopolitical risks in play and continues to benefit the safe-haven USD, which, in turn, is seen as a key factor acting as a tailwind for the USD/CAD pair.

Meanwhile, shipping traffic through the Strait of Hormuz remains blocked due to Iran's restrictions on movements and the US naval blockade of Iranian ports. Adding to this, the Wall Street Journal reported that Trump has instructed aides to prepare for an extended blockade of Iran, aimed at forcing Tehran to dismantle its entire nuclear program. This keeps Crude Oil prices elevated near the highest level in over two weeks and keeps a lid on any meaningful appreciating move for the USD/CAD pair.

Traders also seem reluctant to place aggressive directional bets and opt to wait on the sidelines ahead of key central bank events. The Bank of Canada (BoC) will announce its policy decision later during the North American session, and will be followed by the outcome of a two-day FOMC meeting. Market participants will look for fresh cues about the central banks' future policy path, which, in turn, should provide a fresh impetus to the USD/CAD pair and determine the next leg of a directional move.

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

GBP/USD advaces beyond 1.3450 after BoE decision, US Q2 GDP

GBP/USD gains positive momentum on Thursday, surpassing 1.3450 and trading at fresh multi-week highs. The Bank of England decided to maintain the benchmark rate unchanged at 3.75%. The MPC voted 6-3 to keep rates on hold, with the 3 dissenters favoring a rate hike. US Q2 GDP missing expectations helped the pair advance, while renewed US Dollar weakness across the FX board pushed the pair further up ahead of the monthly close.

EUR/USD confortable around 1.1530, highest in six weeks

The EUR/USD pair trades around 1.1530 in the American session on Thursday, reaching fresh six-week highs. The US Dollar is in sell-off mode, with multiple factors weighing on the American currency. Not only did the Federal Reserve vote divided to keep rates on hold on Wednesday, creating doubts about a September hike, but US Q2 GDP missed expectations. A suspected JPY intervention adds pressure on the Greenback.

Gold recovers the $4,100 level as US Dollar weakens further

Gold trades just above $4,100 amid a US Dollar sell-off. The Greenback enjoyed some near-term demand following Wednesday's post-FOMC downfall, but was unable to retain its gains. The preliminary estimate of the US Q2 GDP showed the economy grew at an annual rate of 1.5%, missing the market's expectations of 2.1%.

Ripple Price Forecast: XRP builds recovery momentum as whales increase exposure

Ripple (XRP) rises toward the pivotal $1.10 resistance on Thursday, marking three consecutive days of gains. This neutral-to-slightly bullish outlook follows the Federal Reserve (Fed) decision to leave interest rates unchanged in the 3.50%-3.75% range.

The FOMC: Rates left on hold; dollar falls as Warsh fails to vote for hike

The Fed kept interest rates on hold today, defying a 30% chance in the Fed Funds Futures market that rates would rise. The Committee voted 9-3 to keep rates on hold, with governors Kashkari, Hammack and Logan all voting to hike rates due to concerns about inflation. The immediate market reaction has been a sharp drop in the USD on a broad basis.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.