The U.S. dollar made gains this morning as markets anticipate that central banks around the world will ease monetary policy. The anticipation comes in the wake of the Federal Reserve’s decision last week to maintain its current rate level.
Today’s news features low-voter turnout in Greece's national election, expectations for Europe’s bond-buying program, falling U.S. oil production, and public appearances by members of the Federal Reserve.
Market Selloff: The Dow Jones Industrial Average gained more than 130 points this morning, paring losses fueled by the Federal Reserve’s rate decision last Thursday. This week, traders will be seeking clues for any pending changes to interest rates in speeches and interviews of Fed members over the next few days.
The Hawks Are Out: The post-FOMC meeting chatter has members at arms over how the bank should have voted last Thursday. This morning, St. Louis Federal Reserve President James Bullard, a non-voting member on the Fed, told CNBC that he would have supported a rate hike and made an economic case to justify his position. Later today, Atlanta Federal Reserve Chair James Lockhart – a voting member – will make his case on monetary policy.
Greek Drama: On Sunday, Greek voters elected Alexis Tsipras’s left-wing Syriza back into power. This was the nation’s fifth election in six years. The nation remains in turmoil after defaulting on its international debt earlier this year, and this vote will give Tsipras the mandate to follow through on a deal. The election had little to do with who is the head of the nation’s leadership, and more to do with the faith that Greeks have lost in their politicians. Following Syriza’s decision to cut a deal with creditors, Greeks have largely lost faith in every political party and their financial prospects.
Oil Prices in Focus: Oil prices jumped this morning on news of a decline in U.S. oil production. U.S. WTI prices slumped 3.28% today, while Brent prices slipped 1.73%. The mews comes in the wake of a report by Goldman Sachs that crude could fall to $20 a barrel.
The U.S. dollar gained ground against a basket of international currencies, as traders considered the possibility of greater easing from a number of central banks.
USD/JPY: Japan’s stock market will be closed on Monday for a holiday. But that didn’t stop the dollar from gaining 0.34% on expectations that the Bank of Japan is likely to boost stimulus in the near future.
EUR/USD: The euro was sliding 0.56% against the dollar on news of the Greek vote on Sunday and expectations that European Central Bank ministers will cut interest rates in order to spur growth. This morning, ECB chief economist Peter Praet told a Swiss newspaper that the bank is ready to alter its trillion-euro bond-purchasing deal in order to stimulate economic growth and combat volatility. ECB President Mario Draghi will meet with policy makers in Brussels this week to discuss monetary policy.
AUD/USD: The Australian dollar pared gains from Friday’s session as traders weighed the impact of China’s economic struggles on the broader Asian-Pacific region. The AUD was down 0.51% at 10:30 a.m.
USD/CAD: The dollar gained 0.21% this morning on a day that the markets will gain more information on how falling oil prices have affected the Canadian economy and oil production in energy-rich province Alberta. Today, Bank of Canada Governor Stephen Poloz will deliver a speech entitled Riding the Commodity Cycle: Resources and the Canadian Economy in Calgary and offer a glimpse into the central bank’s views on monetary policy and the link with commodity pricing.
GBP/USD: The cable was down 0.11%.
Check back on Tuesday at FXHQ.com for an update on the health of the U.S. housing market, CPI figures in Brazil, additional appearances from members of the Federal Reserve, and the September update on consumer confidence in Europe.