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US dollar braces for Fed interest rate cut

business-articlesUS dollar braces for Fed interest rate cut
  • Pound vulnerable to weaker inflation rate
  • Oil price decline weighs on Canadian dollar
  • US dollar supported by solid production figures
Pound picks up ahead of inflation data
The mood towards the pound improved on Tuesday as the UK Supreme Court launched a three day hearing into the legality of Prime Minister Boris Johnson’s proroguing of parliament.
GBP exchange rates could return to the back foot this morning, however, if the August consumer price index weakens as forecast.
If the headline inflation rate eases from 2.1% to 1.9% as predicted this could bolster the case for Bank of England (BoE) monetary loosening.
Unless inflationary pressure shows signs of improvement the Pound may struggle to find fresh support today.
Weaker inflation forecast to dent Canadian dollar
Oil prices declined sharply yesterday following news that Saudi oil production is expected to return to normal levels sooner rather than later.
This dragged the Canadian Dollar down across the board, adding to weakness prompted by a decline in domestic manufacturing sales.
CAD exchange rates may shed further ground this afternoon as forecasts point towards an easing in the monthly inflation rate.
As the Canadian economy has shown signs a slowdown, weaker inflation could encourage the Bank of Canada (BOC) to cut interest rates.
US dollar softens ahead of Fed interest rate cut
Stronger levels of US industrial and manufacturing production improved confidence in the economic outlook and helped to boost the US dollar.
Even so, support for USD exchange rates looks set to weaken ahead of the Federal Open Market Committee (FOMC) policy announcement this evening.
While an expected rate cut has already been priced in by markets, the potential for further US dollar weakness remains.
However, if policymakers signal an intention to leave interest rates on hold for the remainder of the year this could encourage USD exchange rates to further extend their gains.
Upcoming Data:
Wednesday, 18th September 2019
09:30 GBP Consumer Price Index
13:30 CAD Consumer Price Index
19:00 USD Federal Open Market Committee Rate Decision
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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