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The Greenback held on to most of its recent gains and went for more on upbeat FOMC expectations, good data, positive earnings, and signs of progress in healthcare reform while the Loonie got a boost from the API report.

  • U.S. CB consumer confidence up from 117.3 to 121.1 vs. 116.5 forecast
  • Richmond manufacturing index jumped from 7 to 14 vs. no change consensus
  • U.S. S&P/CS Composite-20 HPI dipped from 5.8% to 5.7% y/y
  • U.S. house prices posted 0.4% uptick vs. projected 0.5% gain, 0.6% previous
  • U.S. Senate voted to open debate on healthcare reform
  • New Zealand trade surplus rose from 74M NZD to 242M NZD

Major Events/Reports

API draw lifts oil-related CAD

Crude oil and the positively-correlated Loonie advanced thanks to a larger than expected reduction in stockpiles reported by the American Petroleum Institute.

The API reported a reduction of 10.23 million barrels in stockpiles for the previous week, much larger than the projected draw of 3.0 million barrels. This contributed to easing global oversupply concerns, especially since energy ministers recently pledged to take more steps to curb supply. WTI crude oil rose to $48.55 per barrel.

As my buddy Forex Gump explained in his article on which reports to watch when you’re trading oil, the API report usually serves as a preview of the official data from the Energy Information Administration. The EIA is expected to print a draw of 3.3 million barrels but market watchers are now keeping their fingers crossed for a much larger reduction as well.

Healthcare repeal gets another shot

Down but not out! Last week’s turn of events in Senate dampened hopes that the Trump administration could make a lot of progress in fiscal reform, but the vote to open the debate on healthcare repeal turned those frowns upside down.

The Senate had a nail-biting 50-50 vote on proceeding with the debate on the healthcare bill that could eventually replace Obamacare, but VP Mike Pence swooped in to save the day (at least from the GOP side of things) to open discussions.

From here, the reconciliation process will start and allow senators to propose several amendments before having another vote on the final version of the bill. Of course, the Donald grabbed the opportunity to highlight these developments (through Twitter, no less) and reiterated that he is ready to sign any repeal legislation.

Senate Majority Leader Mitch McConnell promised an “open amendment process” that would give Democrats and Republicans an equal say in things. A lot could still happen from here but for now, this brings serious brownie points in favor of the Trump administration.

Upbeat U.S. data

Dollar traders are in a cheery mood ahead of this week’s FOMC statement as the latest batch of reports have been mostly positive.

The CB consumer confidence index for July advanced from a downgraded 117.3 figure to 121.1 to reflect stronger optimism instead of falling to the 116.5 consensus. Now this figure is often considered a leading indicator of consumer spending since stronger financial optimism usually encourages people to spend rather than save. This upbeat result could also give the Fed enough reason to believe that the recent dip in U.S. retail sales is just temporary.

Meanwhile, the Richmond manufacturing index surged from 7 to 14 instead of holding steady. This reflects a much stronger pace of industry growth than expected, with a larger share of firms reporting higher wages and longer work weeks. The survey also indicated that manufacturing executives remained generally optimistic about business activity in the next six months.

Bullish earnings reports from the likes of Caterpillar, McDonald, and Walmart also buoyed equity indices to close in the green:

  • Dow 30 index is up 100.26 points to 21,613.43 (+0.47%)
  • S&P 500 index is up 7.17 points to 2,477.08 (+0.29%)
  • Nasdaq is up 1.37 points to 6,412.17 (+0.02%)

Major Market Mover(s):

USD

The Greenback had several factors propping it higher throughout the day, keeping dollar bulls in a good mood ahead of the FOMC event.

EUR/USD edged from a high of 1.1713 to 1.1642, GBP/USD dipped from a high of 1.3084 to 1.3022, and USD/CHF bounced back above the .9500 handle.

CAD

The Loonie chalked up another round of gains as the supply glut continued to show signs of easing, especially from the U.S. side of the world.

USD/CAD dropped from a high of 1.2531 to 1.2511, CAD/JPY advanced from 89.14 to 89.50, EUR/CAD ticked down to 1.4564, and GBP/CAD held on to the 1.6300 handle.

JPY

Yen traders let go of their long positions in favor of dollar holdings on hawkish FOMC expectations and strong U.S. earnings.

USD/JPY rebounded from 111.37 to 112.00, GBP/JPY ticked up from 145.13 to 145.89, AUD/JPY is up to 88.87, and NZD/JPY advanced to 83.15.

Watch Out For:

  • 2:30 am GMT: Australian quarterly CPI q/q (0.4% expected, 0.5% previous)
  • 2:30 am GMT: Australian trimmed mean CPI q/q (no change from 0.5% expected)
  • 4:05 am GMT: RBA Governor Lowe’s testimony