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USD – United States Dollar
The U.S dollar index falls around 0.10 percent this morning after last week’s bounce. Volatility in all the major currencies has decreased; for instance, one-year implied volatility in the Euro has dropped to its lowest level since 2007 after outgoing European Central Bank President Mario Draghi reiterated Thursday that policy accommodation will be needed.
Despite that there are no economic data releases today, this week will be very loaded with economic data locally and globally. The FOMC rate decision is the most important for the U.S. dollar this Wednesday at 2:00 pm EST. According to Bloomberg, market participants believe that the Fed rate will be cut by 25 basis points. The Fed leaving rates unchanged at this stage would be a major shock.
On the same day, Wednesday, FX markets will get a first glance of Q3 GDP a few hours before the FOMC statement. However, if you think that Wednesday is data heavy, just wait until Friday, when the much more interesting U.S. employment number (Non-Farm Employment Change) will be released. The current consensus forecast for headline payroll growth (90k) marks the lowest level for a non-hurricane impacted month since November 2012.
Initially, in overnight trading, the pound was trading 0.16 percent higher against the U.S. dollar due to rumours that French President Emmanuel Macron will agree to a Brexit extension to Jan. 31st, alleviating the risk of the U.K. leaving the European Union without a deal on Oct. 31st. However, at the time of this writing, confirmation has been received, and there was some profit taking in the GBP/USD pair. EU leaders have agreed to extend Brexit until 31 January 2020, meaning that the UK will not leave as planned this Thursday. EU Council President Donald Tusk said it was a “flextension”, which means the UK could leave before the deadline if a deal was approved by British Parliament. The British pound’s price action was already showing that the U.K. was highly unlikely to leave the EU by Thursday’s deadline. This situation has helped the Euro as well, which along with the pound, have strengthened against the Greenback over the last two weeks. Looking forward, this week is very important, but pay attention later today when the House of Commons votes on U.K. Prime Minister Boris Johnson’s call for an election on Dec. 12th.
Other central bank announcements this week will come from the Bank of Canada, Bank of Japan, and Brazil BCB. The Loonie and the Yen promise some important swings in the FX market, along with the Pound and the U.S. dollar.
USD/CAD: 1.3041 – 1.3102 ▲
EUR/USD: 1.1069 – 1.1111 ▲
GBP/USD: 1.2801 – 1.2924 ▲
AUD/USD: 0.6800 – 0.6839 ▲
NZD/USD: 0.6323 – 0.6364 ▼
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