img CDN
img AUS
img NZ
img US
Call us now: 1.844.363.7297
imgOnline Dealing Login

Market Update

EncoreFX’s daily market updates are written by our experienced and professional dealing team.

USD Dips Ahead of Fed Decision at 2pm ET

Published November 2, 2016
  • USDCAD is trading near the lower end of its recent, tight range around the 1.34 handle, with spot moving into the mid 1.33's this morning
  • Oil prices continue to trend lower as WTI breaks below $46/bbl; we are seeing the usually strong correlation between oil and CAD showing signs of breaking down in the short term 
  • Yesterday's API inventory report showed an unexpectedly large build in US crude inventories last week – 9.3 barrels compared with forecasts for a 1m build…
  • …obviously, this caught the attention of the market with consideration now turning to today's official EIA data due at 1030am ET
  • Expectations are for the data to show a modest 1m barrel rise in inventories; however, the market is certainly on edge and likely prepared for a larger build than anticipated
  • The US releases ADP private payrolls for September which came in at 146k compared with 165k forecast
  • As unofficial jobs data goes, there is usually a relatively spurious correlation between ADP and the official Non-Farm Payroll data which is released this Friday…
  • …but the market seems to have completely ignored the ADP data thus far with the Fed decision and EIA figures garnering more interest
  • The Fed is widely expected to hold rates today and deliver a statement that ever so gently attunes the market to envisage a December hike…
  • …employment trends have been strong, Q3 GDP was above forecast, manufacturing activity is expanding steadily…
  • …the only identifiable concern is that business investment/capex has remained weak which means that innovation and productivity are likely to trend sideways/downwards
  • This, in the long run, can be a drag on profits, wages and thus potentially inflation as well
  • Aside from that, the US economy is sitting pretty relative to its G10 peers and we suspect it can absorb a rate hike and a slightly stronger US dollar without any issues

Charts: (1) USDCAD and US-CA 2-year spread both moving higher. (2) Seasonality Chart OCT – MAR last five years shows USD +5.7%. (3) Fed rate hike odds. (3) Economic Calendar.