Daily Market Update

U.S. Dollar staying put before Fed comes at 2PM

March 20, 2019

The U.S. Dollar is mostly flat ahead of the Federal Open Market Committee Meeting Announcement later at 2PM, which like all other meetings moving forward will feature a press conference after.

Overview

Although commodity and equity markets were on the up-and-up in recent days, overnight an air of caution kept Asian as well as European stocks from gaining. Some anxiety over the budget and political distractions are weighing on investor sentiment as well. Today, Fed Chairman Jerome Powell may provide guidance that will spark some volatility back to markets.

Chances of the Fed switching to a loose monetary policy are higher than they have in years with odds of a cut to interest rates by December standing at 26.2%. A pessimistic committee on the economy could add fuel to speculation on lower rates going forward and that certainly would be a dollar-downer. We think the assessment on how the economy is going will not be too dire, but since recent figures such as Durable Goods Orders and Factory Orders are pointing at a slowdown and possible contraction, questions on lowering rates will put pressure on Powell to put a timeline on cuts.

 

What to Watch Today…

  • FOMC Meeting 2PM

Complete Economic Calendar can be found here.

 

CAD

The “Loonie” has managed to recover by 1.0% since the first week of March after oil prices and commodity markets recently flourishing. The Bank of Canada is likely not going to be incrementing interest rates anytime soon, but the economy is showing some signs of life and if trade is resolved, we feel there is room for gains later in the year. Expect the Fed meeting to produce a headline or two that will also impact “Loonie,” as the currency responds quickly to shifts in Fed policy.

GBP

The Pound is in the midst of wild swings as now some fear that the delay may not be as long as thought on working towards a workable and agreeable Brexit deal. Prime Minister Theresa May is expected to send a letter to Brussels asking for three months, which seems like very little time. It could also be a sign of the PM’s fatigue and frustration with the process.

There is political pressure and media reports that even claim Parliament would pass a deal as long as she guarantees her resignation. It is not getting any prettier or clearer, but we feel a “no-deal” scenario will be avoided and the next two weeks will be hectic and desperate, thus causing action on the Sterling front.

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