Powell’s testimony on Wednesday rescued US equities but pressured the dollar further. Meanwhile, the Bank of Canada’s latest dovish comments dragged down the CAD despite the decision to taper asset purchases. Australia’s latest job data beat expectations. Powell’s testimony continues today. NZD quarterly CPI eyed.
Powell pressures the dollar
The Chairman of the Federal Reserve Bank in his testimony on Wednesday played down again on inflation. The latest inflation report which was released on Tuesday showed 5.4% – far higher than the 2-3% target set by the Central Bank. With the rampaging inflation, investors expected some comments from Mr. Powell that would give hint to more tapering ahead of the next Fed meeting coming later in the month. However, the world’s most important central banker dodged the bullet again and played safe.
The disappointment dragged the dollar further and gave the needed boost for the US stock market to recover. The dollar has resumed the weakness on Thursday as the index dropped below 92.3 and on course to retest the 92 key support. He will speak further today. It remains to be seen whether he will maintain this line under sustained questioning.
CAD fell despite BoC taper
The Canadian dollar fell across the board on Wednesday as the Bank of Canada revealed a mixed report. While the bank kept its current interest rate unchanged, it cut down on its weekly bond purchases. However, it admitted that inflation will remain on the rise throughout the year among other dovish comments and expectations. The dovish BoC and bearish oil prices dragged the CAD index lower. Meanwhile, the USDCAD remains firm at 1.25 early on Thursday. It had earlier gone 50 pips higher but the CAD minor resurgence pressure the pair.
Aussie jobs got hit but beat consensus
June job data in Australia beat the market expectation’s as 29.1k jobs were added. However, compared to May’s 115.2k, it’s a big blow as the delta covid variant forced fresh lockdowns. The poor data was priced in as the Aussie was barely affected and has remained neutral since the start of the week.
FX Update
While the dollar faces more beating, the Yen got more bids and remains the top gainer in the week so far. Meanwhile, the Swiss Franc leads the way early in the London session on Thursday – the same as Euro but with a slower pace. However, the British Pound is one of the laggards of the session together with NZD and AUD.
Commodities
Gold is back on the front foot on Thursday as it adds to gains above 1830. The yellow metal has accelerated the bullish pace after breaking out of a week range. On the other hand, oil prices falter more – WTI trades at $72.4 early in the first few hours of the London session.
Cryptos
More negative news erupted for cryptos as the Central Banks accelerate processes and prepare the ground for the launch of their digital currencies. Fed Chair and ECB President spoke above the progress of the digital dollar and euro on Wednesday. Also, China is close to launching a digital Yuan and thus banned crypto mining in a nationwide crackdown. Meanwhile, Bitcoin made a significant correction from $32,000 on Wednesday. But overall, volatility has dropped and the range is getting tighter as retail traders withdraw. BTC currently exchanges for $32,500 while Ethereum remains below $2,000. Ripple bounced off $0.6 but the gain so far has been minimal. Same for Doge and other major cryptos. The range-bound moves could continue further with the next intra-day direction seems to be tilted to the upside
Upcoming Events
In the US, we have the Philly Fed Index, unemployment claims and the monthly industrial production report. Later in the day, Fed Chair testifies further. Few hours after the close of the New York session, we have the New Zealand quarterly GDP.
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