The week's focal point is upon us and today’s data hasn’t re-positioned anything dramatically, so we’re basically at a similar place as when we started the London session.
Inflation across the developed countries continues to rise, so this FOMC meeting will be key for those looking for a policy response from the central banks.
Global equities are bracing for a risk-off FOMC meeting, with US indices turning bearish for the day at the US Open.
There has been quite a lot of news out already today and in geopolitics, US President Biden has had the face-to-face meeting with Russian President Vladimir Putin. The two seemed to agree on a lot of things, with Putin later calling Biden a constructive and thoughtful leader.
At the London close WTI, crude oil prices reached a new high, having added more than 1% following the United States Energy Information Administration (EIA) data release showing commercial crude oil stockpiles in the country decreased by 7.4 million barrels during the last week. The day’s high print was $72.73 which was almost entirely undone by the time of writing following comments from the Saudi Energy Minister.
Canadian inflation grew to 3.6% in May of 2021 above market expectations of a 3.5% rise. Base effects from the lows last year around gasoline especially have been driving the inflation faster and as the data from the pandemic lows roll out of consideration, we would expect to see these figures dropping slightly.
The USDCAD has confirmed today that the daily 50 ema is going to act as a level of resistance so a continuation to the downside is on if we can get the USDCAD to close below the 20-period ema. If the USDCAD is to spend a bit of time compressing under the 50-period ema, then should it pop the next area of resistance would be the balance area around the 1.2325 – 1.2275 zone.
In the US, NY Fed Business Activity data grew at its fastest pace on record. The business climate index also rose, indicating firms were more optimistic and things were normalising for the first time since the start of the pandemic. We also received the news around US Housing Starts, with new permits coming under expectations.
The key event today is the FOMC meeting minutes and the statement that Chair Powell will deliver on any decisions that were made. The FOMC will focus on the economy, employment data, inflation, and tapering the loose monetary policy. They are unlikely to change the interest rates and one would hope that they deliver a favourable projection for the world’s largest economy as vaccinations increase and covid disruptions subside.
Before the blackout period, Fed policy decision-makers had been uttering more Hawkish tones and the US Secretary of the Treasury has also been putting the higher rates idea as being not a bad thing too. It will be interesting to see how much forward guidance has been already mentioned and how well the markets are positioned. Changes to the dot plots will be key and I fully expect there to be a fast money move at 7 pm BST.
When the dust has settled and the US markets come back fully tomorrow, we should get the real move, if there is to be one. All fingers crossed we don’t end up in another month-long consolidation pattern on the DXY and we can get some trending moves going again.
Ahead of the FOMC announcements, the US dollar index is still clinging to the $89.50 - $90.50 zone.