Thursday July 25, 2019

US$ was modestly lower against a basket of currencies after three straight days of gains, generally trading in narrow ranges ahead of monetary policy meetings at the ECB today and the Federal Reserve next week. Today we have Durable goods orders which is predicted to increase 0.7% in June after falling 1.3% in May.

EUR fell to a two-month low against the dollar yesterday, hit by weak economic data that bolstered speculation the European Central Bank could undertake aggressive monetary policy easing as soon as today.  Financial markets are focused on the ECB and Fed policy meetings.  We could see the ECB keep rates on hold today, but  adjust its forward guidance, paving the way for a 10 basis-point cut in September.  A significant dovish shift today could still push the Euro lower into a new trading range below 1.11.

GBP strengthened as much as half a percent on Wednesday against the dollar to a three-week high versus the euro as traders cut some extreme short bets against the British currency. New Prime Minister Boris Johnson in his first speech said that the U.K. would come out of the EU on October 31, “no ifs or buts” if no deal was in place. 17 Ministers meanwhile have been replaced or resigned as he appointed mostly pro-Brexit supporters to key cabinet positions.

C$ weakened slightly against the U.S. yesterday as investors await U.S economic data that may guide the Federals Reserve’s interest decision next week.  The Bank of Canada has made it clear that it has no intention of cutting interest rates, but recent strengthening of the CAD could ruin the central banks plan to sit out the rate cuts by other central banks.