No Rate Change Imminent Amid Turbulent Trading Day
Minutes released from the Federal Reserve Open Market Committee meeting of May 1-2 show that they will continue to adopt a patient policy. Rates will remain unchanged for the foreseeable future. This will be the case even if the economy improves. This relatively positive outlook, combined with the patience of policymakers, led the USD index to increase slightly when the news was released. The index was trading at $98.10 at the time of writing.
General Ease Over Global Issues
US-China relations remain heavily strained and without daylight in sight at the moment. At the time of the meeting though, the committee mood was rather more positive on trade relations and the overall global outlook. “Risks and uncertainties that had surrounded their outlooks earlier in the year had moderated, including those related to the global economic outlook, Brexit, and trade negotiations.” The minutes read.
This may have changed significantly just a few days later with the White House raising tariffs on China from May 10th. The markets still took some positive strength from the minutes of the meeting though.
An Otherwise Challenging Day
There were fires to be extinguished around the global market on an otherwise tumultuous day for forex and commodities. In the UK, senior minister, Anne Leadsom was the latest to exit government. Her resignation coming as she stated she no longer believes in the governments approach on Brexit. This added to an already difficult day for the cable. It hit a four-month low of 1.2624 during the day.
Theresa May’s new Brexit proposal which she says makes some concessions aimed to appeal to the opposition and get the deal through the house of commons had already started the day on the wrong foot. There were already signs from the opposition Labour Party that they will not support the deal. This would be its fourth attempted passage.
Oil Price Impacts USD/CAD
The Loonie also endured a rollercoaster day. The pair had lost huge ground earlier in the day on account of the speculation that OPEC members would continue with their production cuts. This sent the price of crude higher. Crude has an inverse relationship with the pair. Due to this, prices were down in the morning. The pair had reached a low of 1.335 today.
This downturn was short-lived however. The release of the EIA inventory report showed huge surpluses of crude. The report charted a surplus of more than 4 million barrels. This caused the crude price to reverse more than 2% where it closed the day. This ultimately caused the USD/CAD to rebound and finish the day strongly at 1.3438.
Another unpredictable day can be expected tomorrow, particularly for the GBP/USD as Britain deals with the impact of losing one of the most senior cabinet members. This, along with the ever-present uncertainty of the PMs own future, and that of Brexit, is almost sure to lead to more volatility throughout tomorrow and the remainder of the week.