USD slips back, CAD underperforms – Scotiabank

FXStreet Insights Team FXStreet

The US Dollar (USD) shrugged off the larger-than-expected downward revision to US jobs data with some ease yesterday, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD edges lower after shrugging off jobs revision yesterday

"Markets were perhaps short dollars running into the data and gains largely reflected profit-taking or repositioning after the fact. The downward revision does suggest that US economic momentum might be a little weaker than previously thought but market expectations for Fed easing are little changed following the updated data, with a 25bps cut still fully priced for next week and just under 90% priced for 75bps of easing by year-end. Something else that did no change was White House criticism of the BLS and the administration’s criticism of the Fed."

"Late last night, a court ruled that President Trump didn’t have cause to fire Fed Governor Cook, however, but an appeal is likely, followed by a Supreme Court ruling. The USD has slipped back somewhat in overnight trade, pulling the MXN and CAD down with it, in light trade ahead of US inflation data due over the next two days. But PPI and CPI may not have too much impact on the dollar, given the Fed’s shifting focus towards the labour market. August PPI is expected to rise 0.3% M/M in headline terms, keeping the Y/Y pace of gains at 3.3%."

"Global stocks are mostly firmer (US equity futures are more mixed) while major bond markets are mostly softer. Geo-political risks (Isreal’s strike on Qatar yesterday and news earlier today of Russian drones violating Polish airspace) have had little impact on sentiment. The DXY’s firm close yesterday may ease downward pressure on the dollar broadly in the short run but the general dollar tone remains relatively soft and more choppy range trade may follow, rather than a deeper dollar recovery."

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD hangs near three-week low, above 0.7100 ahead of Fed decision

AUD/USD retains its negative bias for the third straight day, trading around 0.7120 and close to a three-week low during the Asian session on Wednesday. The US Dollar stands firm near a two-week high as the anticipated Fed rate hike and oil-driven inflation fears continue to push US bond yields to a multi-year high. Furthermore, escalating Middle East tensions benefit the safe-haven buck and weigh on the risk-sensitive Aussie.

USD/JPY remains below 155.50 as bulls await the key Fed decision

USD/JPY climbs to a fresh one-week high during the Asian session on Wednesday amid a bullish US Dollar. Oil-driven inflation fears, along with the anticipated Fed rate hike, continue to support surging US bond yields. Moreover, rising US-Iran tensions underpin the USD's reserve currency status. Spot prices, however, remain below the mid-155.00s as bulls seem hesitant ahead of the Fed decision later today and the BoJ meeting, starting on Thursday.

Gold struggles below $4,300, near one-month low as Fed decision looms

Gold remains depressed below $4,300 during the Asian session on Wednesday as traders look to the crucial Fed decision for a fresh impetus. Meanwhile, a surge in US bond yields, bolstered by oil-driven inflation fears, continues to weigh on the non-yielding bullion. Furthermore, escalating Middle East tensions underpin the safe-haven US Dollar and contribute to a weaker tone around the XAU/USD.

Ethereum continues to attract capital despite impending rate hike and Clarity Act failure

Ethereum declined to $2,400 on Tuesday after the Clarity Act failed to progress in the Senate. Despite that and the market's near certainty of an interest rate hike at the next Federal Reserve (Fed) meeting, the top altcoin has continued to attract fresh capital. Ethereum buyers have been dominating sellers over the past few days.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.

Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight

The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.