Loonie dips amid falling oil prices

Key Movers

The US dollar rises slightly after surprise comments from Federal Reserve’s Vice Chair for Supervision Michael Barr. Barr noted the proposition for US regulators to make changes to their bank-capital rules which would roughly cut in half the 19% capital hike that regulators had planned for some of the US’s largest banks. Markets will be looking ahead this week to the US Consumer Price Index (CPI) data due tomorrow which could influence the Fed’s decision on rate cuts next week. This morning, the US Dollar Index (DXY) traded in the 101.684 range.

In the Eurozone, markets are looking ahead to the European Central Bank’s (ECB) decision on Thursday. The ECB is expected to cut rates by 25 basis points (bps) driven by falling inflation, which is likely to strengthen the EUR amid anticipated rate cuts elsewhere.

In the UK, British pay growth cooled to a more than a two-year low in the three months to July, while employment rose. Average weekly earnings were 5.1% higher than last year, marking the lowest increase since June 2022. This news is likely to prompt the Bank of England (BoE) to consider cutting interest rates before the end of the year, as it had previously indicated it would monitor wage growth as a key factor for potential rate cuts. Currently, there is a 25% chance of a rate cut in September, but November now appears to be a more likely timeframe for the next reduction. Following the release, the GBP briefly surged above 1.3100 against the USD, although it has since dipped to the 1.30632 level.