North American Summary and Highlights 18 September
Overview - A 50bps Fed easing initially saw the USD weaken but Fed signals in the dots and from Powell for a more cautious pace of easing going forward saw the losses more than fully reversed.
North American session
Ahead of the FOMC the USD saw some early losses versus EUR, GBP and CAD which were reversed and the USD was little changed ahead of the decision. The losses came despite stronger than expected US housing starts and permits data, up 9.6% and 4.9% respectively. Bank of Canada minutes from September 4 were reasonably balanced, open to a faster or slower pace of easing, dependent on data, which gave the CAD a marginal boost.
The 50bps FOMC easing initially hit the USD, USD/JPY dipping to a low of 140.45 from near 142, while EUR/USD peaked at 1.1189 from near 1.1125 ahead of the decision. However dots saw a relatively cautious pace of easing going forward, with 50bps more in the remaining two meetings this year and 100bps in 2025, with the neutral rate of 2.875% not reached until 2026. At the press conference Powell stated none should think 50bps is the new pace. By the end of the press conference the USD had largely reversed its losses. Late trade saw the USD moving higher, with USD/JPY briefly touching above 142.50 and EUR/USD briefly touching below 1.11. Similar moves were seen elsewhere. GBP/USD fell below 1.32 after peaking near 1.33. AUD/USD failed to hold a move above .68 while USD/CAD advanced above 1.36.
European morning session
EUR/USD gained around 20 pips through the European morning, while GBP/USD was the best performer, rising 60 pips to 1.3220 after UK CPI data came in essentially in line with expectations at 2.2% y/y. 3.6% core, but triggered general GBP gains, with EUR/GBP down 30 pips to 0.8420. AUD/USD also made gains to 0.6785 from an open at 0.6760.
Otherwise Swedish unemployment data showed a modest rise to 8.4% on a smoothed, seasonally adjusted basis, triggering a small rise in EUR/SEK in early trade, but EUR/SEK finished the session little changed at 11.32. EUR/CHF moved slightly lower to 0.9385 from 0.94.