Markets consolidate ahead of the widely anticipated Federal Reserve Chair Jerome Powell’s speech tomorrow. The Fed Chair is anticipated to have a dovish tone tomorrow, and is expected to layout a critical shift in policy to Average Inflation Targeting (AIT) which allows inflation to surpass 2% and catch up with past low inflation. Such a change implies leaving interest rates at low levels for longer, thus implying a weaker US$. Trade related currencies, including CNY move slightly higher boosted by the Sino/US trade commitment, while other major currencies consolidate ahead of the Fed Chairs speech. Intraday US Durable goods will provide intraday direction.
Oil prices remain steady near 5-month highs as hurricane Laura poses the biggest threat to US oil output in 15-years. C$ continues to edge stronger supported by the Sino/US trade commitment and firming oil prices. No Canadian data out today, so the focus will be on hurricane Laura’s impact on oil prices, EIA Crude oil Stocks change, US Durable goods Orders and BoC Wilkins speech. Momentum supports C$, with key support at 1.3120 (Jan23), if breached look for 1.2952 (Jan7th) with resistance remains at 1.3265.
Euro dips back towards 1.18 level as markets consolidate ahead of Fed Chairman’s speech Thursday. The Fed Chairman’s speech is widely anticipated to increase volatility if the focus is on the new Average Inflation Targeting policy which could keeping low interest rates for longer. Growing concern over the rise in coronavirus cases across Europe, with Spain at the forefront of new cases is dominating headlines. Governments have been reluctant to impose widespread lockdowns, but this may change when the temperature cools down and the continent enters flu season. Expect markets to remain within current ranges until tomorrows Fed Speech, support at 1.1755 with resistance at 1.1850.
GBP is holding steady amid speculation the UK PM may step down in 6-months, Brexit concerns and ahead of the much-anticipated Fed Chairman’s speech. The UK PM’s office denies the rumors of his resignation from The Times column. Brexit talks remain at a standstill with the EU Chief negotiator reportedly telling EU states to be “Cold-Blooded” with Britain. Coronavirus cases remain steady as the government continues to take a pro-active approach at stemming fresh outbreaks quickly. Focus remains squarely with the US to provide direction. Support at 1.3080 with resistance at 1.3190.