US DOLLAR
The greenback is trading broadly higher as the Federal Reserve begins its two-day meeting. The Fed is widely expected to deliver another “patient hold”. However, the market will be closely watching for the updated economic projections and looking for signs of future rates heading lower by end of this year. The FOMC members are hoping that the ongoing trade frictions between the US and several of its partners are contained, allowing for sustainable growth, without any prop from the central bank. The economic calendar is relatively thin today and we expect currency market to trade within recent familiar ranges ahead of the Fed announcement.
CANADIAN DOLLAR
USD/CAD has stalled after bouncing from its lowest level in three months. Investors have turned cautious ahead of twin event risks: release of key Canadian inflation data and the FOMC announcement. Canadian manufacturing sales fell 0.6% in April and inventory levels recorded a fifth consecutive increase according to the latest release from Statistics Canada. We expect negative sentiment to weigh on the CAD and a soft CPI number tomorrow amidst global trade tensions will likely fuel talks of a rate cut from the Bank of Canada.
EURO
Negative economic sentiment from the Eurozone is hurting the shared currency today. EUR/USD is down 0.25% on the day after the ZEW Indicator for Economic Sentiment for Germany declined to minus 21.1 points. Global trade tensions, geopolitical risks and fear of a hard Brexit scenario are sharpening the appetite for Euro bears. ECB Chief Draghi issued fresh signal this morning, saying the central bank can turn to more stimulus tools to support the regional bloc.
BRITISH POUND
GBP/USD is trading with a negative sentiment over growing fear of the prospect of a hard Brexit. GBP/USD is oscillating around a five –month low. UK waits for its new PM to lead them out of the EU. Market seems to be pricing in a scenario of no-deal exit on October 31st. Investors will be also keep an eye on the Bank of England which is due to announce a no-change decision this Thursday. The pair is expected to remain under a bearish cloud cover.
JAPANESE YEN
USD/JPY is in consolidation mood after collapsing to a recent five month low. This was led by safe-haven related flows amidst escalating trade tensions between the US and China. Investors’ main focus will be on the Fed decision. The Bank of Japan also meets this Thursday and the market remains on stand-by mode to re-assess the possibility of a convergence/divergence in monetary policies.
