FOMC rate decision on Wednesday and jobs data on Friday weigh on dollar
Peter Compton " | October 28, 2019
The Federal Reserve is widely expected to cut interest rates this Wednesday and jobs data is expected to be weak (85K). But the main driver of US dollar weakness this morning is general risk-on sentiment as equities point toward record highs.
Data for this week:
Tuesday: S&P House Price data for August and Pending Home Sales for September
Wednesday: Q3 GDP, FOMC rate decision
Friday: Nonfarm Payrolls for October, Wage data and ISM for October
October 28, 2019
EUR/USD 1.1087 GBP/USD 1.2840 USD/CAD 1.3062 AUD/USD 0.6826 USD/JPY 108.83 USD/CNH 7.0637 USD/ILS 3.5341 USD/MXN 19.0436 USD/CHF 0.9963 USD/INR 70.8887
The US dollar has lost 1.6% vs. a basket of currencies since the start of the month. The weakness will very likely continue this week with the Fed expected to cut rates and jobs data to be negatively impacted by the General Motors strike. Risk sentiment has been positive in October as the US and China seem to be moving toward a resolution to the trade war and a hard Brexit looks much less likely.GBP
The British pound is up slightly vs. the US dollar in volatile trading. The European Union has granted the UK a Brexit extension until January 31. Prime Minister Boris Johnson is expected to press the UK parliament today for a vote on an early election. The chances of a hard Brexit have diminished significantly over this month with the pound up 5% vs. the US dollar.EUR
The euro is slightly stronger today on general US dollar weakness. The European Central Bank says goodbye today to Mario Draghi who steps down as President being replaced by Christine Lagarde. Draghi served for 8 years and is credited with saving the euro during the European debt crises of 2012 when he vowed to do “whatever it takes” and stating the euro was “irreversible”.CAD
The Canadian dollar is slightly weaker today as oil prices dip. This Wednesday, the Bank of Canada is expected to keep rates on hold. Should the US Federal Reserve cut rates on Wednesday, as expected, the benchmark rate for both countries will be 1.75%, providing lift to the loonie as rates in the US are expected to be cut further in December and/or 2020.ASIA/PACIFIC
The Japanese yen lost ground, as most safe-haven currencies and assets gave in to today’s risk-on sentiment. Earnings season has generally been positive in the US and trade war tensions have calmed.
The Australian dollar is flat this morning as FX traders await clarity from the FOMC and other economic data expected later this week.
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