Federal Reserve's Jumbo Rate Cut Weakens US Dollar, Sparks Market Volatility

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3550-1.3650

Euro                 1.5100-1.5200

Sterling            1.7950-1.8050

WTI Oil (opening level) $70.52

The US Dollar Index is weaker this morning as the US Federal Reserve went ahead with a 50 basis point reduction to their key lending rate. Markets became very volatile after the announcement as the Dollar dropped off and stocks jumped but that was short-lived as investors because worried by comments from Fed Chair Powell that the main reason for the "Jumbo Cut" was a softening labour market and the desire by the Fed to prevent the economy from slowing too much. Overnight much of the pessimism was dissipated as stocks are all higher and the dollar recovered a bit.

Sterling is higher this morning as the Bank of England did not cut interest rate this morning, GBP.USD is up over 130 points and GBP.CAD went from 1.7880 to trade at 1.8010 before pulling back a little bit this morning. 

The Canadian Dollar had a volatile day as USD.CAD initally dropped to trade near the 1.3550 (0.7380) level before jumping higher to trade at 1.3650 (0.7326) and then finally settling back at the 1.3550 level where it first started before the announcement. This type of movement highlights what I have always maintained about the importance of leaving orders in volatile markets. We will now hear from the Bank of Canada next month of their rate cut.

Volatility is set to continue to today as markets settle in to this new interest rate reality, Stocks are poised to open some 400 points higher so the Dollar will give back some more strength, whether the Canadian Dollar can take advantage of this weakness remains to be seen.