 Dollar drops notably in response to Fed Chair Jerome Powell's prepared remains for the two day Congressional testimony which starts today. The greenback is currently the weakest one for today, followed by Yen and the Canadian. On the other hand, New Zealand Dollar is the strongest one, followed by Swiss Franc and then Sterling. Traders seems to be assuming that Powell's reference that uncertainties continue to weigh on outlook as a nod to July rate cut. Yet, Powell will still need to be more explicit in the Q&A session of the testimony. Currently, markets are still pricing in 100% chance of a Fed rate cut this month. We'd like to point out again that just back in June, nine out of seventeen FOMC participants expected interest rates to stay at 2.25-2.50% or higher within this year. It's rather hard to imagine these nine policymakers would change their mind for a cut, after Mexican tariffs were averted, US and China agreed to halt trade war escalation, and a solid June NFP report. BoC is another major focus in US session. It's widely expected to keep policy rate unchanged at 1.75%. The case for easing faded after recent data continued to show broad-based pick-up in the economy. Also, WTI crude oil has already rebounded notably from last year's low of 42 and settled between 50/60. Headline inflation also picked up to 2.4% yoy, with core measures averaged at 2.1%. BoC would possibly shift towards a more neutral stance. But for now, due to external risks, there shouldn't be any case to turn hawkish yet. |
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