Talking Points

US Dollar in Consolidation Mode as Markets Digest FOMC Outcome
Comments From Fed’s Bullard, George May Stoke Market Volatility
Canadian Dollar Underperforming Ahead of Augusts’ Inflation Data

The US Dollar was little-changed against its leading counterparts in overnight trade as currency markets consolidated after two days of aggressive volatility in the aftermath of Wednesday’s FOMC policy announcement. The greenback plunged after Ben Bernanke and company unexpectedly opted not to trim the size of the central bank’s QE3 effort and retraced higher over the subsequent 24 hours as a supportive set of Jobless Claims and Existing Home Sales figures helped drive a correction.

The economic calendar is quiet in European and US hours and S&P 500 futures are trading flat ahead of the opening bell on Wall Street, hinting quiet consolidation is likely to continue into the week-end. Headline risk is not totally absent however, with speeches from Kansas City Fed President Esther George and St. Louis Fed President James Bullard due to cross the wires. Both are current members of the rate-setting FOMC committee and any comments that further illuminate this week’s decision to withhold “tapering” asset purchases and/or help shape expectations for the months ahead may generate volatility.

The Canadian Dollar came under pressure ahead of Augusts’ Consumer Price Index data due later in the day. The report is expected to show the benchmark year-on-year inflation rate slowed to 1.1 percent, marking the lowest reading in three months. Canadian economic data has tended to underperform relative to expectations since mid-June and traders suspect that more of the same can help build the case for a dovish turn in BOC monetary policy.

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