US DOLLAR GAINS AHEAD OF FED BEIGE BOOK RELEASE
European stocks rose today even as budget problems in Italy continued. Yesterday, in an unprecedented move, the European Union in Brussels announced that it would reject the budget proposal by Italy. This was mostly because the budget does nothing to address the increasing deficit. Stocks also rose even after disappointing economic numbers from Germany and the EU. Germany manufacturing PMI for September was 52.3, which was lower than the consensus of 53.5 and August’s 53.7. The services PMI was at 53.6, which was lower than the estimate of 55.5. For the region, the manufacturing and services PMI disappointed. The numbers from IHS Markit showed that the manufacturing PMI was at 52.1 versus the 53.0 expected, while the services PMI was at 53.3 which was lower than the expected 54.5.
US futures pointed to a higher open after the better-than-expected results by Boeing. The company announced a quarterly profit of $3.58 per share which was better than the expected $3.47. Its revenues and free cash flow topped analysts’ forecasts and boosted its forward guidance. The gains in the US stocks was offset by weak earnings from companies like UPS and Restaurant Brands. Today’s gains came after yesterday’s volatile session that saw the Dow fall by 500 points.
The price of crude oil fell sharply today, continuing a decline that started yesterday. The movement in the price is mostly because of the increased supplies from Saudi Arabia and the United States. Yesterday, data from API showed an increase of 9.3 million barrels in US inventories. This was higher than the 3.9 million increase traders were expecting. It was also higher than last week’s data that showed a massive drawdown. Today, traders will receive the official inventory data from the energy department.
The Canadian dollar was little moved against the USD as traders waited for the decision by the central bank. The BOC will release its interest rates decision at 15:00 (GMT). Traders expect the bank to hike rates by 25 basis points. This is despite the disappointing inflation and retail sales numbers released on Friday last week. The rate hike comes a day after a report showed that a third of Canadians are concerned about going bankrupt. This was an increase from a similar report that was released in June.
The US dollar rose today as its peers retreated. The euro was down by 65 basis points while the sterling was lower by 50 basis points. In addition, the Swiss franc fell by 0.40% while the Australian dollar and New Zealand dollar were lower by 0.05% and 0.20% respectively. The gain of the dollar came after US president continued criticizing the Federal Reserve. It is also less than two days before the US releases its first reading of the GDP numbers. Today, the Federal Reserve will release its Beige Book. This is a document that is closely followed by investors because it shows the thinking of Fed officials.
The price of Brent crude fell to an intraday low of $75.10. This was the lowest level since August this year. It then paused the descent as traders started to focus on the upcoming data from the energy department. The current price is along the lower line of the Bollinger Bands, which is a sign that the downward momentum could continue. In the short term, however, the pair could see a minor recovery especially if inventory numbers show reduced stocks.
The USD/CAD pair was little moved today as traders waited for the important interest rates decision and the following press conference. The pair is now trading at 1.3087. This is slightly below the important resistance level of 1.3100. The double EMA is currently showing signs of a crossover as shown in the four-hour chart below. The RSI is currently at 53 and moving lower. Therefore, while the pair could go in either direction, there is a likelihood that it will move lower.
The EUR/USD pair declined sharply after the disappointing EU CPI numbers. The US PMI and the Fed’s Beige Book will be released later today. The pair reached an intraday low of 1.1380, which was the lowest level since August this year. The double EMA show that the pair will likely continue moving lower. If it does, the pair will test the important support of 1.1300. If it does this, it will have completed the inverted cup pattern. It will then start moving higher, probably to the 1.1500 level.