Yesterday, the Dollar stabilized against its major peers with the focus on the US Federal Reserve’s two-day policy meeting. The Fed is expected to raise its benchmark interest rate due to a tightening labor market and may provide more detail on its plans to shrink the Bond portfolio it amassed to nurse the economic recovery. The Fed embarked on its first tightening cycle in more than a decade in December 2015. A quarter percentage point interest rate rise today would be the second nudge upwards this year following a similar move in March.
The Canadian Dollar extended its gains and hit its highest level in two months against the US Dollar, buoyed by hawkish comments from Canada’s Central Bank, and expectations that an interest rate rise could come sooner than anticipated. Bank of Canada Senior Deputy Governor Carolyn Wilkins said that Q1 growth was “pretty impressive” and signs that economic growth was broadening, would lead the Central Bank to consider whether current low rates would still be required.
Meanwhile, Oil prices edged up, lifted by statements that Saudi Arabia was making significant supply cuts, although rising US output meant that markets remain well supplied. Saudi Arabia, the world’s top Oil exporter, will limit volumes of Crude to some Asian buyers in July and deepen cuts in allocations to the United States. Saudi Arabia accounts for about 40% of the cuts pledged by OPEC. It has reduced output by more than 500,000 bpd so its total production now runs slightly below 10 million bpd.