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FOMC’s day will be a busy day. The Asian session will feature New Zealand’s release of Q2 Current Account data, and Japan will report August trade data.
The Australian Westpac Leading Index will be released. The focus will be on the People’s Bank of China (PBoC) interest rate decision. Later on the day, the UK will report August inflation data, and Germany will release wholesale inflation figures.
During the American session, the US central bank will announce its decision on monetary policy.
An important event during the Asian session will be the decision of the People’s Bank of China regarding interest rates. The 1-year Loan Prime Rate is expected to remain at 3.45% after last month’s cut.
The key event on Wednesday will be the Federal Reserve’s decisions. Market participants expect the central bank to keep the Fed Fund rate unchanged at 5.25-5.50%. The focus will be on the statement, the economic projections, and Powell’s press conference.
Economic Data
Data released on Tuesday showed mixed numbers from the US housing sector. Housing Starts tumbled 11.3% in August, while Building Permits jumped 6.9%.
Market Developments
During the American session, the US Dollar Index rose amid deteriorating market sentiment and higher US Treasury yields. The DXY rebounded to 104.80, rising above 105.00.
EUR/USD failed to hold above 1.0700 and pulled back, remaining within a downward channel. The final reading of the Eurozone Harmonized Index of Consumer Prices came in at an annual rate of 5.2% in August, revised from the preliminary 5.3%. Germany will report the August Producer Price Index on Wednesday, with a decline expected in the annual rate from -6% to -12.8%.
USD/JPY posted its highest daily close since November but remains below 148.00. Japan will release August trade data on Wednesday.
USD/CHF rose again and hit intraday monthly highs but is still unable to break above 0.9000. The Swiss State Secretariat for Economic Affairs (SECO) will release its Autumn 2023 Economic Forecasts report. On Thursday, the Swiss National Bank is expected to announce a 25 basis point rate hike to 2%.
GBP/USD failed to hold above 1.2400 and pulled back, staying near monthly lows. The UK’s August inflation report is due on Wednesday. The annual Consumer Price Index rate is expected to rise from 6.8% to 7.1%. Such a figure could likely solidify the odds of a rate hike from the Bank of England, which will announce its decision on Thursday.
The Consumer Price Index in Canada rose 0.4% in August, surpassing the market consensus of 0.2%. The annual rate rebounded from 3.3% to 4%. The Canadian Dollar (CAD) peaked after the announcement but then pulled back. USD/CAD lost ground and hit monthly lows at 1.3380 but finished far from the bottom around 1.3440.
Today’s report leaves Q3 CPI tracking well above projections from the July MPR and will add to the Bank of Canada’s concerns around persistent price pressures. We will still get one more inflation report ahead of the October BoC meeting and a softer growth outlook will allow the Bank to look through some of this persistence, but today’s report should help reaffirm that the mission is not yet accomplished and upcoming meetings remain live for another hike.
NZD/USD rose above the 20-day Simple Moving Average and posted a daily close above 0.5900. The current indicators are modestly biased to the upside in the short term. New Zealand’s Q2 Current Account data is due on Thursday, along with Q2 GDP data.
AUD/USD tested the resistance area around 0.6470 but failed to break higher. It maintains a mostly bullish bias ahead of the Asian session. The Westpac Leading Index is due on Wednesday.
Precious metals erased gains during the American session, driven by a stronger US Dollar. Silver retreated to $23.20, while Gold dropped to $1,930.
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