US dollar top performer despite 0.25% Fed rate cut as future expectations drop
BoJ keeps its policy on hold, BoE and SNB up next with rates expected to remain unchanged
EUR/USD: US dollar’s top performance keeps bear trend channel intact
Yesterday's closely watched event resulted in the The Federal Reserve’s (Fed) decision to match majority expectations of a 0.25% rate cut, though signaling that the US central bank would be “highly data-dependent” in choosing where rates will go next, and policymaker projections showing no further rate cuts for the rest of the year in contrast to money markets slightly majority pricing in another rate cut this December. The net result was the greenback outperforming against the main FX majors, and ensuring that this pair’s bear trend channel continues to hold as its price remains below all its main moving averages. With the Fed not pursuing a clear easing policy even as it cut rates and intervened in the money markets with liquidity injection to bring down repo rates, there’s a clear policy divergence between the Fed and the European Central Bank (ECB) which is set to restart QE.
GBP/USD: USD outperforms but GBP in second place
It was a fundamental day yesterday for this pair, starting with UK consumer price index (CPI) figures that missed its 1.8% target coming in a notch lower at 1.7%, and with its core that excludes energy down 0.3%. It ended with a stronger US dollar on what was seemingly a more hawkish Fed that didn’t want to commit to further easing. But we're not out of the woods yet, with the Bank of England's (BoE) turn to announce its monetary policy whereby expectations are for the central bank to keep rates on hold at 0.75%, an easier task with inflationary pressures subsiding slightly. Retail data will be released prior, and Brexit news is always in the background like Juncker's comments on the risk of a no-deal Brexit being 'very real'. From a technical standpoint its positive but with an underlying volatility today on the central bank decision making breakouts the conformist strategy and reversals the contrarian.
USD/JPY: Finishing higher but down this morning on unchanged BoJ policy
Yesterday’s finish was higher for this pair’s price as the US dollar topped the performance charts following the Fed’s decision and tone, but this morning Bank of Japan (BoJ) is the main focus for JPY related pairs, with the Japanese central bank keeping its monetary policy on hold but signaling that it could ease next month. That has sent this pair’s price lower, with volatility not surprising given dual central bank decisions that effect both aspects of this pair’s price. The Swiss National Bank (SNB) is up next set to effect the safe haven franc, though its attention will be less on what the Fed did and more on what the ECB's actions were last week.
USD/CAD: Rising as energy retraces back down and the greenback outperforms
The technicals may have been neutral with the outlook consolidatory, but there were plenty of factors to stretch this pair's price and infuse it with volatility, starting with Canadian CPI figures that contracted for the month, followed by EIA's unexpected surplus, and ending with a more bullish Fed despite a 0.25% rate cut. With energy prices falling off the highs despite ongoing geopolitical tensions that have failed to subside, the net result for this pair is a technical overview that’s turning more positive, and with its price on the verge of crossing the last of its main moving averages. While Canadian data today is low impacting, retail data will be released tomorrow, and its energy underlying will be at the mercy of the latest geopolitical news.
AUD/USD: Technical overview shift as stronger greenback and disappointing Australian data take its toll
Investors were holding their breath yesterday, and the net result was against the technical overview of this pair and causing a technical overview shift from what was an initializing bull trend to a more consolidatory outlook and with its price back below its main moving averages. The catalyst yesterday may have been a stronger greenback, but for today morning its Australian employment figures that showed its rate rise a notch to 5.3% and shifting the odds of a rate cut out of the RBA next month. With little left on the economic calendar, it's likely the greenback, commodities market, and overall risk appetite that will be the main drivers for this pair. In terms of sentiment, retail bias has risen 7% to a majority long 61% as shorts take profit and longs initiate.
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