GBP/USD Steady Near 1.3500; Dollar Weakness and Fed Watch Looming

The GBP/USD pair traded around 1.3500 level during the Asian session on Thursday because of the two days of upward gains. It is believed that the pair may be able to climb upwards because the US Dollar might fall. The global commentators point out that the independence of the Federal Reserve remains a concern to investors, which weighs on the Dollar, leaving GBP/USD with room to appreciate should market sentiment remain wary of the Fed policy outlook.

The traders are observed to be awaiting the U.S. Q2 GDP data release later today. Then will be the focus on the July Personal Consumption Expenditures (PCE) Price Index, the main inflation gauge of the Federal Reserve, and a useful indicator of its future interest rate decisions.

According to the world reports, on Tuesday, the US President Donald Trump said that he was eliminating Federal Reserve Governor Lisa Cook off the board. He also asserted that she was in connection with falsified mortgage documents and stated that he was ready to engage in a court battle against her. Some analysts believe that the ruling indicates a grave heightening of tensions. It is perceived that the ouster of Fed Governor Cook can increase the likelihood of more drastic cuts in the interest rates since Trump still insists on the central bank to reduce the rate of interest charged on the borrowed funds. As per CME FedWatch Tool, traders currently believe that the Fed has more than an 88% probability of reducing the Fed funds rate by at least a quarter point at the next Fed meeting in September. Global Marketers note that this has risen by 82% last week anticipating changes that the policy would be relaxed.

It is noted that the GBP/USD pair did not respond much following the Retail Sales report of the Confederation of British Industry (CBI). The index marginally increased to -32 in August as compared to -34 in July, which was lower than expected of -33. Although the change has been minor, the figures indicate that the UK retail sales volumes are declining after 11 consecutive months, which indicates that the consumer demand remains weak and poses a challenge to the retail industry. Some analysts highlight that the markets were not affected extensively.

According to the CBI, the businesses continue to experience high costs, but they are now raising the prices at a slower rate as compared to summer in the past, with the Bank of England (BoE) closely monitoring service inflation rates. Meanwhile, company profits are declining due to weak demand and increased costs of labour. It is noted that this pressure is weakening business confidence and forcing many companies to reduce their plans to hire and invest, furthering the worry over the UK economic growth.

USD/CHF Dips 0.8015 Amid Fed Uncertainty, Swiss GDP Watch

The USD/CHF pair declined and traded around 0.8015 in the Asian session on Thursday. It is believed that the US Dollar is under continued pressure against the Swiss Franc because of the speculation on independence of the Federal Reserve. Global commentators point out that the traders are reserved, and the Greenback is maintained on the defensive. It is observed that the major economic data releases are now in the spotlight of the market, and Switzerland and the United States will release their Gross Domestic Product (GDP) data later in the day. Global reports anticipate that such reports may give new guidance on the currency pair, which will affect future market sentiment and price changes.

On Monday, President Donald Trump said that he had removed Federal Reserve Governor Lisa Cook, the first time any U.S. president fired a Federal Reserve governor. Trump indicated that he believes that he will soon have a majority of his own nominees on the board of central banks, who will favour his agenda to reduce interest rates. It is expected that these surprising moves of the Trump administration, and the possibility of a more dovish Federal Reserve, may influence the confidence in the U.S. Dollar in the short-term, which may cause financial markets and policy orientation to become more uncertain.

Global reports indicate that traders have increased anticipation of a reduction in the Federal Reserve rate in the next month since New York Fed President, John Williams, hinted that it may happen. On Wednesday, Williams reported that interest rates will probably be reduced in the future, but this choice will be determined by the future economic statistics. It is expected that when the data depicts that it is weak, then the policymakers can agree to a reduction of the rate in the meeting in September. The traders noted that this increased likelihood of the declining rates has burdened the US Dollar because lower costs of borrowing usually drag the currency, and therefore, it becomes less appealing to the investors than those with higher returns.

It is expected that in the future, on Thursday, Swiss GDP will be the subject of attention. Global reports point out that the economy is projected to increase by 0.1% on a quarter-to-quarter basis and 1.4% on an annual basis in Q2. It is believed that in case the outcomes are less than predicted, the Swiss Franc (CHF) can fall and thus avoid additional losses in the currency pair. Global analysts point out that any unexpected downwardness will be monitored in the markets.

NZD/USD Trades 0.5860 Amid RBNZ Cuts, US Fed Concerns

In early Asian hours on Thursday, the NZD/USD pair traded around 0.5860 level. The market movements are not as strong, and the global commentators noted that traders are considering the Global Central Bank expectations. The New Zealand Dollar (NZD) is said to be under pressure due to the anticipation of a further reduction in the policy of the RBNZ, and the US Dollar (USD) has some potential dangers associated with the political tensions. Global reports indicate that the independence of the Federal Reserve was raised when President Donald Trump announced the dismissal of Fed Governor Lisa Cook because of the allegation that she had a mortgage borrowing problem, thereby casting new doubts on the US monetary policy.

Investors are closely monitoring when US President Donald Trump decides to dismiss Fed Governor Lisa Cook and his threat to have a majority of the Federal Reserve board under his nominees soon. It was reported globally that US President Trump has indicated that he would like the Fed to lower interest rates and this has been a cause of concern that he can attempt to dictate monetary policy. Conversely, John Williams, the president of New York Fed emphasized that the central bank needs to be independent. It is assumed that fears of political interference in the Federal Reserve will gravitate the US Dollar in the short run particularly against the New Zealand Dollar (NZD).

Global marketers anticipate that the New Zealand Dollar (NZD) would not be able to strengthen significantly following the reduction in interest rates by Reserve Bank of New Zealand (RBNZ) last week and its indication of further cuts. Policymakers were pointing at the local and global risks to growth. RBNZ Governor Christian Hawkesby clarified that it will rely on economic data in the future, although he added that in case businesses and consumers remain cautious and the economy requires additional assistance the central bank may take additional measures to provide an additional boost and ensure that the economy stays on course. Global marketers point out that this situation indicates that the future of the Kiwi is still unpredictable and has little upward potential.

The global commentators note that on Thursday, markets should look forward to key US economic updates. Q2 GDP can be paid with the second estimate, and the growth is projected to be at 3.1 per annum. Investors will also analyse weekly Initial Jobless Claims which follows the trends in unemployment and Pending Home Sales which is a measure of the housing market activity. These reports are believed to affect market sentiment and future expectations of the direction the economy is going to take soon.

USD/CAD Drops 1.3770 Amid Fed Independence Threat, Trade Talks

The USD/CAD pair dropped in the third consecutive session, trading around 1.3770 in the Asian trade on Thursday. Traders noted that the Canadian Dollar is appreciating with the US Dollar depreciating, burdened by the mounting threats over the independence of the Federal Reserve. Some reports note that market players now focus on the release of the Q2 US GDP data that might further affect the direction of the USD.

On Tuesday, US President Donald Trump confirmed that he has removed the Federal Reserve Governor Lisa Cook off the Board of Governors at Fed. He alleged that Cook had committed a crime by participating in forged mortgage documents and is ready to fight in a court. Global reports point out that this step is the major conflict between the White House administration and the Federal Reserve leadership.

Removal of Fed Governor Cook is expected to increase the possibility of greater interest rate reductions, Trump still pushing the central bank to reduce the cost of borrowing. Investors will now consider increased chances of a reduction in rates at the September meeting of the Fed. As per the CME FedWatch tool, there is a current market expectation of at least an 88% possibility of a quarter-point cut rather than the 82% of last week. Global reports point out that this change reflects an increasing demand for a looser monetary policy due to political and economic pressures.

Global reports point out on Thursday that the core negotiator of China in trade, Li Chenggang reported that China and Canada had an open, practical, and constructive discussion on how to enhance economic and trade relations. He elaborated that both parties deliberated on how to achieve better cooperation as they overcome challenges. Li underlined that China is ready to manage any disagreement in a constructive manner, paying attention to practical steps and positive dialogue. The aim, he observed, is to build a more robust and a more reliable economic relationship between the two states in the future.

Global reports noted that the Governor of the Bank of Canada, Tiff Macklem, stated that the central bank would not alter its 2% inflation target any time soon, and had no intentions of adjusting their inflation target in the nearest future. He clarified that the trade policy and the U.S. tariff policy is uncertain and this makes the situation unpredictable. Macklem cautioned that the supply problem may elevate inflation in the future. He further noted that the Bank of Canada is relying on scenario analysis, which aids in testing various possible scenarios to make its monetary policy choices and make them adaptable to emerging economic situations.

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