News

Canada Foreign Portfolio Investment in Canadian Securities came in at $26.69B, above expectations ($-1.32B) in July

United States Building Permits Change dipped from previous -2.8% to -3.7% in August

United States Housing Starts Change dipped from previous 5.2% to -8.5% in August

• Prior starts 1.428M
• Starts change -8.5% vs +5.2% prior
• US August building permits 1.312M vs 1.37M expected
• Permits change -3.7% vs -2.2% prior

This is a poor reading and it is near the bottom of the post-covid range. Rate cuts will start to stimulate US housing so long as 30-year yields come down. If the Fed gets too dovish, we could see curve steepening and in that case then current 6.2% rates are as good as we’re going to get.

This article was written by Adam Button at investinglive.com.

The USD is mixed – but little changed – ahead of the Federal Reserve rate decision at 2 PM ET. The Fed is expected to cut rates by 25 basis points to 4.25% – its first rate cut since December 2024 when the central bank cut by 25 basis points, ending the succession of cuts that took the target rate from 5.5% to 4.5%.The cut expected today is in reponse to the weaker US employment data that has shown a sharpl decline in employment than previously reported.

Focus will first be on the statement, and vote count. Will there be dissenters? Will they be for no change and/or for a 50 basis point cut. The expectations for GDP, inflaiton and unemployment will also be released, along with the “dot plot” that traders will focus on the expectations for additional cuts in 2025 (is it 1 or 2 more cuts), along with the expectations for 2026. Of course the press conference will also be a focus.

Ahead of the US rate decision at 9:45 AM ET, the Bank of Canada will announce it’s rate decision. The cental bank is expected to cut its overnight policy rate by 25 basis points, lowering it from 2.75% to 2.50%. Markets have priced in a very high probability of a move, driven by recent signs of economic weakness, including a 1.6% contraction in second-quarter GDP and rising unemployment. Inflation has also eased, with August’s annual reading at about 1.9%, below expectations, though core measures remain somewhat elevated. Taken together, the softer growth backdrop and moderating price pressures give the Bank room to ease policy. Looking ahead, analysts expect the BoC to remain cautious but signal the possibility of further cuts later this year if inflation stays under control and the economy continues to weaken.

In the video below, I will look at the 3 major currency pairs but also the USDCAD. The EURUSD is the biggest mover with a fall of -0.24% (higher USD) after the sharp rise yesterday that saw the pair extend to new highs for the year and the highest level since September 2021.The price has weakened toward the July1 high at 1.1828 but has remained above with a low of 1.1833 so far.

The USDJPY is lower (lower USD) by a modest -0.12% but is down testing the key 100 day mat at 146.19. The low has reached 146.20 so far and trades at 146.26 to start the US session. The GBPUSD is marginally changed at -0.02% to start the US session after running to higher to the highest level since July and testing a swing area between 1.3673 to 1.36826.

For the USDCAD, it too is little changed with a gain of 0.08% to start the day.

A look around the markets shows, the US stock market mixed in pre-market trading:

• Dow industrial average is up 32
• S&P index is down -2.26
• NASDAQ index is lower by -16.25 points

in the US debt market, yields are little changed:

• 2- year yield 3.511%, +0.1 basis points
• 5 year yield 3.588%, +0.5 basis points
• 10 year yield 4.020%, -0.6 basis points
• 30 year yield 4.628%, -1.8 basis points.

Looking at other markets:

• Crude oil is trading down $0.30 at $64.23
• Gold is trading down $20.67 after reaching yet another record yesterday. It currently trades at $3669.23. It’s a new record high is at $3703.13
• Silver is down by $0.88 at $41.64.
• Bitcoin is down by -$560 at $116,258

European stock indices are trading mixed after yesterday’s sharp declines:

• German Dax unchanged
• France’s CAC, -0.30%
• UK’s FTSE 100 +0.22%
• Spain’s Ibex -0.8%
• Italy’s FTSE MIB -1.20%

This article was written by Greg Michalowski at investinglive.com.

Fed:

• FOMC Preview: Focus on the dot plot and Fed Chair Powell guidance
• Dissents and dot plots in focus for the Fed later in the day
• FOMC Hawks and Doves: A comprehensive overview
• Fed preview: Most banks expect 25 bp cut, some 50 bp bigger easing, bigger impact, move

Headlines:

• Gold cools from record highs with eyes on the Fed today
• China tells its tech companies to stop buying all of Nvidia’s AI chips – FT
• ECB’s de Guindos: The current interest rate is appropriate
• ECB’s Escriva: We need to be agile and ready to move in any direction on monetary policy
• ECB’s Stournaras: Soft landing achieved, but must remain flexible and ready to act
• UK August CPI +3.8% vs +3.8% y/y expected
• Eurozone August final CPI +2.0% vs +2.1% y/y prelim
• US MBA mortgage applications w.e. 12 September +29.7% vs +9.2% prior

Markets:

• JPY leads, EUR lags on the day
• European equities little changed; S&P 500 futures down 0.1%
• US 10-year yields down 1 bps to 4.016%
• Gold down 0.7% to $3,665.19
• WTI crude oil down 0.7% to $64.09
• Bitcoin down 0.5% to $116,347

The European trading session today is one filled with waiting and cautious anticipation ahead of the FOMC meeting decision later today.

The dollar kept steadier after stumbling heavily in trading yesterday, with EUR/USD recouping some light ground from around 1.1860 to 1.1835-40 levels during the session. But besides that, there is very little movement as traders are keeping a more tentative approach in the lead up to the Fed later.

Other major currencies are only seeing light changes in general against the greenback, all holding within 0.1% change on the day currently.

In the equities space, we are seeing stocks also hold a more cautious mood. US futures are marginally lower while European indices are now flattish for the most part after some light gains at the open. That reaffirms the more tentative mood overall as market players are all waiting on the Fed before committing to the next move.

Among the more notable movers today are commodities with precious metals being pushed lower amid some profit-taking activity. Gold is down 0.7% to $3,665 after briefly clipping $3,700 yesterday while silver is down over 2% to $41.63 after having neared the $43 level in the day before.

In terms of data, we had UK inflation meeting expectations and that will just reaffirm a policy pause by the BOE tomorrow.

This article was written by Justin Low at investinglive.com.

Bears take a breather above new 11-week low on Wednesday, as markets await the verdict from Fed at the end of two-day policy meeting. The dollar index extended the bear-leg from early Aug peak at 100 zone, a part of larger downtrend from early January peak at 110.00 (down around 12% for the year) and […]

The post Dollar Index: Bears May Accelerate If Fed Signals a Start Policy Easing Cycle appeared first on Action Forex.

Today the Fed is expected to finally restart its journey towards the neutral rate after the last cut in December 2024. Let’s see what’s priced in by the market and what kind of surprises could trigger a repricing in expectations.

Statement

The Fed should acknowledge the weakening in the labour market while maintaining the lines about elevated inflation and uncertainty. No change to QT. In terms of votes, we should see a majority of participants voting for a 25 bps cut with two or three participants voting for a 50 bps reduction (Miran, Waller and Bowman). There might also be one participant voting to hold the rate steady (Schmid).

Potential surprises:

• 50 bps cut (very dovish)
• More than three members voting for 50 bps cut (dovish)
• No cut (very hawkish)
• No dissents for 25 bps cut (slightly hawkish)
• Only Miran voting for 50 bps (slightly hawkish)

*Note that whatever Miran does or says from now on, will likely be ignored by the market because of his political appointment.

Dot Plot

At this meeting we also get the Summary of Economic Projections (SEP). The focus will be on the dot plot and it will be compared to the current market pricing since this is what’s priced in. The market is pricing a total of 148 bps of easing by the end of 2026, with 68 bps in 2025. Therefore, the market is expecting 3 cuts in 2025 and 3 cuts in 2026. In June, the Fed projected 2 cuts in 2025 and 1 cut in 2026. The Fed is expected to match the market pricing for 2025 but could be more hawkish for 2026 by projecting just one or two cuts.

Potential surprises:

• Just one more cut in 2025 and anything lower than three cuts in 2026 (hawkish)
• Two more cuts in 2025 and four cuts in 2026 (dovish)
• Three more cuts in 2025 and three cuts in 2026 (very dovish)

Press Conference

This is where things will get interesting and where it’s harder to really get a consensus, but most agree that Powell will put more focus on the labour market given the recent weakness. Nonetheless, we have Powell’s Jackson Hole Symposium speech as the baseline.

In fact, in August Powell already pivoted towards the employment side of the mandate, downplaying the risk of lasting inflation dynamic and higher wage growth setting by stating that “given that the labor market is not particularly tight and faces increasing downside risks, that outcome does not seem likely”.

Potential surprises:

• Powell makes a strong pledge to support the labour market in case it weakens further (dovish)
• Powell downplays the labour market weakness and puts more emphasis on inflation (hawkish)

This article was written by Giuseppe Dellamotta at investinglive.com.

The federal government will switch from paper checks to electronic payments this month. Here’s what Social Security and other payment recipients need to know.