Dollar Range-Bound Ahead of GDP; Fed Meeting Tomorrow

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Dollar Range-Bound Ahead of GDP; Fed Meeting Tomorrow

OCTOBER 29, 2019

The U.S. dollar advanced modestly overnight but is on the defensive in early trading. The charts seem to indicate that traders are squaring positions for month-end flows and before the Federal Reserve’s interest rate decision tomorrow.

Overview

Fed Fund Futures show that markets are currently pricing in a 94% chance of an interest rate cut tomorrow.  The greenback has remained resilient in the face of several interest rate cuts this year, probably because the Fed is not alone. Over 30 different central banks have cut rates this year meaning rate cuts in the U.S. have done little to diminish the interest rate differential between the U.S. and many of its counterparts.

This morning’s economic docket may prove to be an afterthought with only pending home sales and the Conference Board’s consumer confidence.  The first reading of third-quarter GDP is set for tomorrow and will give traders a clearer view of the health of the economy.  Non-farm payrolls, PMI and ISM manufacturing on Friday will also dictate the direction of the dollar heading into the new month.  The manufacturing sector has been in a recession for most of the year.

What to Watch Today…

  • No major events scheduled for today.

A complete Economic Calendar can be found here.

CAD

The Canadian dollar gained overnight and reached a three-month high against the U.S. dollar despite falling oil prices.  The Bank of Canada is expected to hold rates steady at 1.75% tomorrow, the same day the Federal Reserve is expected to cut 25 basis points.  A number of analysts point to the closing differential between the two central banks as the main catalyst for loonie strength.  There was no major Canadian economic data released today.

GBP

GBP/USD remains choppy as the pair continues to trade with parliamentary and Brexit related headlines.  The pair seesawed 50 basis points within three hours in early trading.  Prime Minister Boris Johnson lost a vote yesterday to force an early general election.  The PM is changing tactics today and will propose a different bill that he deems easier to pass.  Nevertheless, the reality for the sterling remains: the likelihood of a no-deal Brexit is basically off the table and they will have a general election sometime in December.

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