CAD strives for stable ground

Key Movers

The US Dollar Index (DXY) rose by around 0.17% so far today to trade near the 104.748 level. The USD continues to rise ahead of tomorrow’s rate decision. The US Federal Reserve is expected to keep interest rates unchanged in Wednesday’s meeting. However, traders anticipate a Fed rate cut in September, with the CME FedWatch Tool indicating a 100% probability of at least a quarter percentage point cut.

In the Eurozone, the EUR/USD pair edged lower to near 1.0800 so far today. The major currency pair fell despite better-than-expected Eurozone flash Q2 Gross Domestic Product (GDP) data. The report showed that euro GDP expanded steadily by 0.3%. Investors expected the economy to have grown at a slower pace of 0.2%. Annualized GDP rose by 0.6%, in line with expectations and faster than the former release of 0.4%. This improved the Eurozone's economic outlook and the Euro's appeal.

The pound fell sharply against the USD to near 1.2850, with a focus on upcoming Fed and BoE policy meetings. The GBP exhibited a weak performance against its major peers, except the Japanese Yen, so far today amid market speculation for the Bank of England (BoE) to begin reducing interest rates from the August meeting, which will be announced on Thursday. Reuters reported that projections showed slightly over a 58% chance that the BoE will cut its key borrowing rates by 25 basis points (bps) to 5%.

The Japanese Yen extended its losses against the USD for the second successive day today. Markets remained cautious ahead of the Bank of Japan’s (BoJ) policy meeting on Wednesday, which could potentially result in a rate hike. Markets are speculating that the BoJ may increase rates by 10 bps to 0.1% and is widely expected to announce its bond purchase tapering plans.