USD rises ahead of Fed rate decision
Daily Currency Update
The US Dollar Index (DXY) increased this morning by 0.24% to the 104.577 level. This jump was partly attributed to the Bank of Canada’s (BoC) rate cuts last week and expectations for the Federal Reserve to leave rates unchanged at their upcoming meeting on July 31st. US prices rose modestly in June due to a decrease in the cost of goods offsetting an increase in the cost of services. This indicated an improving inflation scenario, possibly leading the Federal Reserve to start reducing interest rates in September. According to the Commerce Department, consumer spending slowed a bit last month. Signs of decreasing price pressures and a cooling labor market could bolster the confidence of Fed officials that inflation is heading toward the central bank’s 2% target. The Personal Consumption Expenditures (PCE) price index, which measures how much people in the United States spend on goods and services, inched up 0.1% last month, in line with economists’ predictions.Key Movers
This week is expected to be highly eventful for the EUR/USD pair, with the first estimate of Eurozone Q2 Gross Domestic Product (GDP) scheduled for Tuesday, followed by July inflation data. The EUR/USD pair dipped this morning by around -0.32% to the 1.08 level.The Bank of England (BoE) faces uncertainty as to whether it will implement its first interest rate cut since 2020 on Thursday. Interest rate futures indicated a 50% chance of a quarter-point rate cut on August 1st. However, others would not be surprised if the decision was postponed until the following meeting on September 19th. Consumer price inflation has been at the BoE’s 2% target in May and June, lower than in the United States or the Eurozone.
The USD/CAD pair rose by around 0.16% so far today to trade near the 1.3855 level, nearing an 8-month high of 1.3899 reached in November of 2023. The Canadian dollar’s dip against its US counterpart may have come in part due to the Bank of Canada’s (BoC) recent rate cut, expectations for the Federal Reserve to hold interest rates in its meeting this week, and declining oil prices. West Texas Intermediate (WTI) crude oil dropped by around -0.83% this morning to the 76.627 level.
Expected Ranges
- EUR/USD: 1.0815 - 1.0870 ▼
- GBP/USD: 1.2807 - 1.2888 ▼
- AUD/USD: 0.6537 - 0.6568 ▼
- USD/CAD: 1.3816 - 1.3848 ▲