What happened in the U.S. session?

As widely expected, the Bank of Canada (BoC) cut its overnight rate for the second consecutive meeting by 25 basis points (bps) to bring it down to 4.50% while continuing to normalize its balance sheet. The Governing Council noted that excess supply in the Canadian economy has aided in cooling inflation in recent months, thus warranting looser monetary policy as the Canadian labour market has shown signs of moderation. In addition, the council also anticipates CPI inflation to decrease in the second half of the year due to base effects for gasoline prices, before steadying at the 2% level in 2025.

During the press conference, BoC Governor Tiff Macklem stated that policymakers are not on a predetermined rate path and will make decisions on a meeting-by-meeting basis based on incoming data. He also added that there was a clear consensus to cut by 25 bps at this recent meeting and that balance sheet normalization has still ways to go. The Loonie has lost nearly 1.4% over the last couple of weeks as USD/CAD gained almost 200 pips thus far.

What does it mean for the Asia Session?

As Asian traders digest the latest moves by the BoC, the Loonie remains under intense selling pressures causing USD/CAD to surge past the 1.3800-level – this currency pair was trading around 1.3820 this morning.

The Dollar Index (DXY)

Key news events today

GDP (12:30 pm GMT)

Employment Claims (12:30 pm GMT)

What can we expect from DXY today?

The advance estimate for second quarter GDP is now expected to show economic activity growing 2.0%, higher than the previous estimate of 1.4%. GDP estimates for the second quarter have been mixed thus far but as more data becomes available, growth appears to be converging around 2% for this period. Meanwhile, unemployment claims remain elevated with the 4-week average now standing at 234K. Last week’s reading came in at 243K while the latest estimate of 237K points to another elevated reading. Should claims come in higher than expected once more, it could cause the dollar to come under pressure as this labour metric shows some signs of softness in the U.S. labour market.

Central Bank Notes:

• The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the seventh meeting in a row.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year.
• The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks. Inflation has eased over the past year but remains elevated and in recent months, there has been modest further progress toward the Committee’s 2% inflation objective.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while job gains have remained strong, and the unemployment rate has remained low.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks and does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• Next meeting runs from 30 to 31 July 2024.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

GDP (12:30 pm GMT)

Employment Claims (12:30 pm GMT)

What can we expect from Gold today?

The advance estimate for second quarter GDP is now expected to show economic activity growing 2.0%, higher than the previous estimate of 1.4%. GDP estimates for the second quarter have been mixed thus far but as more data becomes available, growth appears to be converging around 2% for this period. Meanwhile, unemployment claims remain elevated with the 4-week average now standing at 234K. Last week’s reading came in at 243K while the latest estimate of 237K points to another elevated reading. Should claims come in higher than expected once more, it could cause the dollar to come under pressure as this labour metric shows some signs of softness in the U.S. labour market.

Next 24 Hours Bias

Medium Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie remained in freefall as it tumbled under the threshold of 0.6600. This currency pair continued to slide lower towards 0.6550 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6530

Resistance: 0.6600

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35%, marking the ninth pause out of the last ten board meetings.
• Over the year to April, the monthly CPI indicator rose by 3.6% in headline terms, and by 4.1% excluding volatile items and holiday travel, which was similar to its pace in December 2023.
• The central forecasts published in May were for inflation to return to the target range of 2–3% in the second half of 2025 and to the midpoint in 2026 while there have been indications that momentum in economic activity is weak, including slow growth in GDP, a rise in the unemployment rate and slower-than-expected wages growth.
• Inflation is easing but has been doing so more slowly than previously expected and it remains high and the Board expects that it will be some time yet before inflation is sustainably in the target range.
• The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.
• Next meeting is on 6 August 2024.

Next 24 Hours Bias

Strong Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Stronger demand for the dollar drove the Kiwi under 0.5950 overnight. This currency pair continued to slide lower towards 0.5900 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.5880

Resistance: 0.5950

Central Bank Notes:

• The Monetary Policy Committee kept the OCR unchanged at 5.50% for the eighth meeting in a row and agreed that restrictive monetary policy is reducing domestic demand and consumer price inflation.
• The Committee is confident that inflation will return to within its 1-3% target range over the second half of 2024.
• The decline in inflation reflects receding domestic pricing pressures, as well as lower inflation for goods and services imported into New Zealand while recent monthly Selected Price Indexes suggest weakening in some of the more volatile inflation components, while survey measures of cost pressures and pricing intentions have continued to decline.
• Non-performing bank loans and corporate insolvencies have increased from low levels in line with declining economic activity while bank credit growth also remains very subdued, in line with weakness in the domestic economy and low business and consumer confidence.
• Next meeting is on 14 August 2024.

Next 24 Hours Bias

Medium Bearish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The yen continues to strengthen steadily with USD/JPY now falling under the 153-level. This currency pair continued to slide lower towards 152.50 as Asian markets came online – these are the support and resistance levels for today.

Support: 152.00

Resistance: 154.00

Central Bank Notes:

• The Bank considers that the policy framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control and the negative interest rate policy to date have fulfilled their roles. With the price stability target of 2%, it will conduct monetary policy as appropriate, guiding the short-term interest rate as a primary policy tool.
• The Bank of Japan decided on the following measures:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1% while continuing its Japanese government bonds (JGB) purchases in accordance with the decisions made at the March 2024 MPM.
  2. The Bank decided, by an 8-1 majority vote, that it would reduce its purchase amount of JGBs thereafter to ensure that long-term interest rates would be formed more freely in financial markets.
• Underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• In the second half of the projection period of the April 2024 Outlook for Economic Activity and Prices (Outlook Report), it is likely to be at a level that is generally consistent with the price stability target of 2%.
• The year-on-year rate of increase in the CPI (all items less fresh food), has been in the range of 2.0-2.5% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices have waned. Inflation expectations have risen moderately.
• Japan’s economy has recovered moderately, although some weakness has been seen in part while is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• Next meeting is on 31 July 2024.

Next 24 Hours Bias

Medium Bearish

The Euro (EUR)

Key news events today

German ifo Business Climate (8:00 am GMT)

What can we expect from EUR today?

The German ifo Business Climate deteriorated in June, led by the manufacturing and trade sectors as pessimistic expectations increased. July’s estimate of 88.9 points to a relatively unchanged business sentiment which could add some downward pressure on the Euro before the start of the European trading hours.

Central Bank Notes:

• The Governing Council today decided to keep the three key ECB interest rates unchanged in July, following a 25 basis points cut in June.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.25%, 4.50% and 3.75% respectively.
• Monetary policy is keeping financing conditions restrictive but at the same time, domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year.
• While some measures of underlying inflation ticked up in May owing to one-off factors, most measures were either stable or edged down in June.
• The incoming information indicates that the euro area economy grew in the second quarter, but likely at a slower pace than in the first quarter.
• Services continue to lead the recovery, while industrial production and goods exports have been weak – investment indicators point to muted growth in 2024, amid heightened uncertainty.
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner and will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim and is not pre-committing to a particular rate path.
• Next meeting is on 12 September 2024.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Demand for the greenback waned overnight as USD/CHF fell under 0.8850. This currency pair was trading around 0.8830 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.8820

Resistance: 0.8880

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points for the second consecutive meeting, going from 1.50% to 1.25% in June.
• The underlying inflationary pressure has decreased again compared to the previous quarter but inflation had risen slightly since the last monetary policy assessment, and stood at 1.4% in May.
• The inflation forecast puts average annual inflation at 1.3% for 2024, 1.1% for 2025 and 1.0% for 2026, based on the assumption that the SNB policy rate is 1.25% over the entire forecast horizon.
• Swiss GDP growth was moderate in the first quarter of 2024 with the services sector continuing to expand, while manufacturing stagnated.
• Growth is likely to remain moderate in Switzerland in the coming quarters as the SNB anticipates GDP growth of around 1% this year while currently expecting growth of around 1.5% for 2025.
• Next meeting is on 26 September 2024.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Cable hit an overnight high of 1.2937 before retreating away from this level. This currency pair was trading around 1.2890 as Asian markets came online and is expected to edge lower as the day progresses – these are the support and resistance levels for today.

Support: 1.2855

Resistance: 1.2940

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 7-to-2 to maintain its Official Bank Rate at 5.25% for the seventh consecutive meeting.
• Two members preferred to reduce the Bank Rate by 25 basis points to 5%, an increase of one from the previous meeting.
• Twelve-month CPI inflation fell to 2.0% in May from 3.2% in March, close to the May Monetary Policy Report projection. CPI inflation is expected to rise slightly in the second half of this year, as declines in energy prices last year fall out of the annual comparison.
• Reflecting a margin of slack in the economy, CPI inflation had been projected to be 1.9% in two years’ time and 1.6% in three years.
• UK GDP appears to have grown more strongly than expected during the first half of this year. Business surveys, however, remain consistent with a slower pace of underlying growth, of around 0.25% per quarter.
• UK real GDP had increased by 0.6% in 2024 Q1, 0.2% stronger than had been expected in the May Monetary Policy Report and Bank staff now expect GDP growth of 0.5% in 2024 Q2 as a whole, stronger than the 0.2% rate that had been incorporated in the May Report.
• The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation.
• Next meeting is on 1 August 2024.

Next 24 Hours Bias

Medium Bearish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

As widely expected, the Bank of Canada (BoC) cut its overnight rate for the second consecutive meeting by 25 basis points (bps) to bring it down to 4.50% while continuing to normalize its balance sheet. The Governing Council noted that excess supply in the Canadian economy has aided in cooling inflation in recent months, thus warranting looser monetary policy as the Canadian labour market has shown signs of moderation. In addition, the council also anticipates CPI inflation to decrease in the second half of the year due to base effects for gasoline prices, before steadying at the 2% level in 2025.

During the press conference, BoC Governor Tiff Macklem stated that policymakers are not on a predetermined rate path and will make decisions on a meeting-by-meeting basis based on incoming data. He also added that there was a clear consensus to cut by 25 bps at this recent meeting and that balance sheet normalization has still ways to go. The Loonie has lost nearly 1.4% over the last couple of weeks as USD/CAD gained almost 200 pips thus far.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.50% while continuing its policy of balance sheet normalization.
• Canada’s economic growth likely picked up to about 1.5% through the first half of this year and is forecasted to increase in the second half of 2024 and through 2025.
• Overall, the Bank forecasts GDP growth of 1.2% in 2024, 2.1% in 2025, and 2.4% in 2026, reflecting stronger exports and a recovery in household spending and business investment as borrowing costs ease.
• CPI inflation moderated to 2.7% in June after increasing in May as broad inflationary pressures eased.
• The Bank’s preferred measures of core inflation have been below 3% for several months and the breadth of price increases across components of the CPI is now near its historical norm but shelter price inflation remains high, driven by rent and mortgage interest costs, and is still the biggest contributor to total inflation.
• These preferred measures of core inflation are expected to slow to about 2.5% in the second half of 2024 and ease gradually through 2025 and CPI inflation is expected to come down below core inflation in the second half of this year, largely because of base year effects on gasoline prices.
• There are signs of slack in the labour market with the unemployment rate rising to 6.4%, as employment continues to grow more slowly than the labour force and job seekers taking longer to find work. Wage growth is showing some signs of moderation, but remains elevated.
• The Governing Council’s future monetary policy decisions will be guided by incoming information and assessment of their implications for the inflation outlook.
• Recent data has increased the council’s confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain.
• Next meeting is on 4 September 2024.

Next 24 Hours Bias

Strong Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

The EIA crude oil inventories experienced a much higher-than-anticipated drawdown for the fourth week in a row as 3.74M barrels of crude were removed from storage to highlight the improved U.S. demand for oil. However, prices remain under pressure due to concerns over weak demand from China and potential ceasefire talks in the Middle East. WTI oil tumbled under $78.50 per barrel overnight and looks set to drift lower as the day progresses.

Next 24 Hours Bias

Medium Bearish