Morning Commentary & Currency Insights – March 22, 2018

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The dollar sold off quite hard after the FOMC raised interest rates by a quarter percentage point as the market deemed FED comments to be more dovish than anticipated leaving room for doubt about future hikes in 2018.  While there are still 2 hikes priced in for the remainder of the year the cautious tone struck by FED Chair Powell prompted risk to be paired back as the focus now turns to potential tariffs against China regarding intellectual property violations.  The Bank of England has maintained their benchmark rate at 0.5% resulting in a stronger Pound as the market perceives future hikes to be inevitable.

USD/CAD dropped to 1.2830 in overnight trading as the combination of a NAFTA auto reprieve and a dovish FED precipitated a shedding of recent USD long positioning.  Focus will now be on Friday’s retail sales and, more importantly, inflation data to see if the Bank of Canada will remain in a holding pattern on interest rates.  Support will reside at 1.2825 with resistance above at 1.2965.

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