FX & market recap:
FX and equity traders were looking for an excuse to book profits. The FOMC minutes served one on a platter. Analysts and pundits did not expect to glean much insight from the minutes, released yesterday afternoon. That meant even minor tweaks had major impacts, in the context of thin August markets with an overbought, US dollar.
The lack of an appetite for yield curve control (YCC, not to be confused with the Cornwall, Ontario airport code) sparked a wave of US dollar buying, sent global equities tumbling, and knocked gold prices lower. The minutes said about YCC, "Of those participants who discussed this option, most judged that yield caps and targets would likely provide only modest benefits in the current environment.” Traders were hoping to see support for this measure, which would keep US interest rates depressed.
US weekly jobless claims are expected to improve modestly to 925,000 from 963,000 last week. In addition, the Philadelphia Fed Manufacturing Survey is due.
Canadian dollar highlights:
USD/CAD rebounded from the 1.3135 low yesterday and rallied to 1.3232 overnight, as prices tracked broad US dollar moves against the majors. Canada inflation data was weaker than expected. CPI rose 0.1% y/y in July below the forecast for a 0.5% increase and keeps the “interest rates low for longer” them intact.
Euro highlights:
EUR/USD is trading just below the middle of its overnight 1.1813-1.1868 range as the single currency consolidates losses on the retreat below 1.1900. The drop is viewed as a correction in an over-bought market, and while prices remain above 1.1780, EUR/USD is a buy on dips.
British pound highlights:
GBP/USD took out the top of its overnight 1.3066-1.3118 range in NY trading and touched 1.3130, despite the FTSE 100 index dropping 1.10%. GBP/USD may be getting a bit of support from recent reports that the UK government expects the framework of a trade agreement with the EU in September. The intraday technicals are bullish above 1.3060 looking for a break above 1.3150 to extend gains to 1.3250.
Asia Pacific highlights:
USD/JPY stagnated in a 105.89-106.20 range, consolidating gains made after touching 105.10 on Tuesday, but remain on the defensive due to soft US Treasury yields.
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