US DOLLAR
The market is relatively calm this morning and waits for the Fed Chair to start his two-day testimony before the House of Financial Services CommThe greenback took a tumble after Fed Chair Powell telegraphed to the markets that FOMC is leaving the door ajar for an “insurance cut” following the re-emergence of “crosscurrents”. He returns for his second-day testimony and is likely to replay the same tune: business investments are slowing down and “apparent progress on trade” is generating far more uncertainty. The Dollar Index is down 0.3% with the British Pound rebounding from the 2019 low. Commodity-linked currencies are also trading firmer on the back of strong crude oil price. WTI futures is extending its gains, north of $61 a barrel due to supply concerns.
CANADIAN DOLLAR
USD/CAD crash to lowest level since Sept 2018 on the back of a rather dovish assessment Fed Powell. The greenback is under broad-based selling pressure, and a pick-up in oil prices is also pushing the CAD higher. The Bank of Canada, meanwhile, delivered a no-change decision and is expecting the Canadian economy to grow at a healthier pace in H2. The pair is expected to explore lower boundaries as USD selling pressure accentuates.
EURO
EUR/USD is holding onto overnight gains, trading close to the 1.13 post, after Powell signalled that the Fed may for go for an insurance cut at its next meeting. Investors now wait for more hints from the Fed before taking on any directional bets. Meanwhile, final inflation data from Germany and France failed to inspire euro bulls. The pair is expected to trade inside the previous month’s range.
BRITISH POUND
Dovish words from Powell gave market participants an excuse to help the pound rebound from multi-month lows. The Fed seems to leave the door ajar for rate cuts amidst trade-war led uncertainty. GBP/USD is up 0.45% this morning but further gains are expected to be capped. The Bank of England believes the “likelihood of a no-deal Brexit has increased since the start of the year” in its latest Financial Stability Report. The Pound and local asset prices are expected to remain volatile.
JAPANESE YEN
The deluge of poor data continues to pour out of Japan indicating the economy could be caught in a deeper slowdown. The Tertiary Industry Activity Index declined 0.2%, lower than market estimates of minus 0.1%. However, with the greenback coming under intense selling pressure in overnight session, USD/JPY is expected to continue to trade with a negative bias.
