No change in rates is the expectation for the May FOMC, the Fed will hold at a mid-point 1.625 percent within a 1.50 to 1.75 percent range. First-quarter weakness will likely be understated in the statement as an anomaly with key emphasis to center on the outlook for growth and whether inflation pressures are picking up.
Meanwhile, the Canadian dollar is basically unchanged as with oil, markets have seemed to ignore the build up in today’s inventory numbers, analysts still believe that globally oil inventories are on the decline.
Expect little change until the FOMC announcement, and unless there is something drastic, it will likely stay that way.
USDCAD 1.2845, 1.2836, 1.2828 1.2882, 1.2872, 1.2878
EUR-USD has settled near 1.2000 after rebound from yesterday’s 1.1981 four-month low stalled at 1.2032. The pair has remained comfortably below its 200-day moving average at 1.2054. This is the third consecutive week the pair has declined in what has become the sharpest run lower since November 2016. The breach and close below the 200-day moving average, yesterday, is the first time below this average since April 2017. Expectations for strong U.S. jobs data on Friday have been maintaining a bid for dollars, while timely survey data show that a cooling in economic growth is afoot, while ECB President Draghi gave dovish-tilting remarks following the central bank’s April policy review last week. Regarding the U.S. payrolls report, we expect a solid 210k headline rise, though risks are to the upside following tight initial claims data and remarkable strength in consumer confidence and vehicle sales data. The Fed announces policy today, but this will likely be a non-event, with no policy change expected and there being no press conference or forecast updates. We advise EUR-USD trend following. Resistance is at 1.2054-60.
USD-CAD has remained buoyant, posting a one-month high of 1.2914 yesterday before retreating to the lower 1.2800s. The move extended a rebound from mid-April two-month low at 1.2527. A correction in oil prices, which have descended back under $68.0 in the WTI benchmark market after making a 40-month high at $69.56, along with a generally firmer bias in the U.S. dollar and associated rise in U.S. Treasury yields, have driven the rebound in USD-CAD. The Canadian dollar had already been coming off the boil in the wake of the April BoC policy meeting, as the statement indicated that the central bank would maintain its cautious stance on future policy changes, which remain data dependent. The latest price action in USD-CAD has negated the downside trend that had been in play over the prior three weeks, from levels near 1.3100.