The US dollar rebounded against all of the major currencies on the back of relatively benign FOMC minutes. There were no surprises in the report so no news was good news for the greenback, which rallied despite lower bond yields and the sell-off in stocks. The central bank cut interest rates by 25bp for the third time this year in October. The minutes explained the reasons for why back to back easing was necessary by highlighting global growth risks and trade uncertainty. While further easing could be necessary, the Fed is in no rush to ease again. We know from Chairman Powell’s more recent comments that low rates are here to stay and for the time being the chance of another rate cut exceeds the chance of tightening.

The Canadian, Australian and New Zealand dollars were hit the hardest by the greenback’s rise. Despite Canada’s report of growing inflationary pressures, the loonie dropped to a 5 week low versus the greenback. USD/CAD is back at 1.33 and aiming for its October highs under 1.3350. Consumer prices grew 0.3% in the month of October after falling -0.4% in September. Year over year CPI growth held steady at 1.9%. Investors are worried that Bank of Canada Governor Poloz, who is scheduled to speak tomorrow will ring similar alarm bells as Deputy Governor Wilkins. Both policymakers believe that the global context has weakened, which increases the risks of a rate cut. The futures market is only pricing in a 21% chance of easing this year and while we don’t see the central bank lowering rates in 2019, the odds are greater than that. After Poloz is Canadian retail sales on Friday so the next 48 hours will be particularly busy for the loonie.

Between dovish RBA minutes, weaker labor market data and slippery US-China relations, the Australian dollar is headed towards the bottom of its 5-day long-range. According to President Trump, the US continues to negotiate with China and they want to make a deal but China is skeptical about the US’ commitment and occupied by its own domestic issues. Also, it's hard to imagine that Trump will offer trade concessions to China at a time when China vows “forceful measures” if President Trump signs the “Hong Kong Human Rights and Democracy Act that will require an annual review of the special treatment that HK receives under US law. This bill, which has unanimous support in Senate and strong support in the House is seen as siding with HK protestors. The bill would allow the President to impose sanctions and travel restrictions on anyone responsible or involved in violating human rights of any HK individual. This fear of ongoing tensions between the US and China is the main reason why Australia will be fast-tracking its $3.8 billion infrastructure bill but with the risks mounting, the Australian and New Zealand dollars extended their slide.

EUR and GBP also retreated but their losses were nominal compared to the commodity currencies. Inflationary pressures in the Eurozone remain weak according to the producer price report, which showed German PPI falling for the second time in three months. Sterling traders, on the other hand, seemed pleased with Boris Johnson’s performance in last night’s debate. According to a snap poll by YouGov, Johnson won by a small 2% margin (51%-49%) versus Jeremy Corbyn. He had clearer answers on Brexit while Corbyn was more elusive on his position. The fact that there were no major slipups was good enough for sterling traders who kept the currency at 6 months highs.