What to watch for on Thursday, September 8:
The US dollar remained strong during the first half of the day, but eased during the American session.
The EUR/USD pair flirted with the December 2002 low at 0.9859 before recovering, and is now struggling to regain parity. However, the European energy crisis is likely to limit demand for the shared currency. Rising prices in the EU are taking a toll on households and businesses and pushing up inflation. European non-ferrous metals producers have called for urgent EU action to prevent permanent deindustrialisation in a letter to European Commission President Ursula Von der Leyen. Producers noted that “50% of the EU’s aluminum and zinc capacity has already been forced to go offline due to the energy crisis.”
Russian President Vladimir Putin was quick to respond by announcing that Moscow is working on building new pipelines to transport gas, some of which run through Mongolia to China. He also pointed out that limiting the price of oil in the G7 “would be an absolutely stupid decision”, adding that they would not supply “anything” if it is against the Russian economic interest. “No gas, no oil, no coal, no fuel, nothing.”
The European Central Bank will announce its monetary policy decision on Thursday. The ECB is expected to raise interest rates by 50 basis points when it meets on Thursday, but the focus will be on whether or not European policymakers are willing to put growth behind taming inflation.
In the US, the Beige Book, a survey of economic conditions based on data from 12 district banks, was published. The document showed that price growth has slowed in 9 of the 12 districts, although most respondents believe price pressures will last until at least the end of the year.
The Bank of Canada raised its main rate by 75 basis points to 3.25%, in line with market expectations. The statement accompanying the move indicated that policymakers would likely continue to raise the benchmark rate given the inflation outlook. With a positive tone, the document also revealed that they believe that the economy continues to operate with excess demand and that labor markets remain tight. USD/CAD is trading around 1.3140.
Hearings on the Bank of England’s monetary policy report pressured the British pound early in the day, with GBP/USD tumbling to 1.1404. Monetary policymakers remain on a tightening path, with Governor Andrew Bailey signaling that the central bank would continue to respond to price shocks. Dollar weakness helped the pair rally to the current 1.1510 price zone.
The USD/JPY pair continued to rise and reached 144.98, ending the day around 144.00.
The AUD/USD pair traded around 0.6750 at the end of the day, paring early losses. Encouraging Australian data did not help the pair, which rose amid improved tone on Wall Street and easing in government bond yields, which weighed on the US currency.
XAU gold fell to an intraday low of $1,691.32 a troy ounce, but managed to recover towards the current level of $1,716.
On the other hand, oil prices fell sharply amid speculation about declining Chinese demand following tepid local data. China’s trade surplus was $79.39 billion in August, well down from $101.26 billion in July.
Source: Fx Street