Dollar Down Ahead of FOMC Minutes
The US dollar has weakened over early European trading on Wednesday as the market awaits the release of the June FOMC meeting minutes. The minutes are expected to give further insights into the likelihood of the bank cutting rates at the upcoming July meeting later this month. The market is currently pricing in a .25% cut. USD index trades 97.02 last with price trading back below the 97.10 level.
USD Weighs on EUR
EURUSD has broken firmly higher today with price surging back above the 1.1217, taking advantage of USD weakness. A set of dovish FOMC minutes later today could add further fuel to the recovery which is likely to remain USD focused in the absence of any tier-one domestic data.
GBP Rises on GDP data
GBPUSD has enjoyed better trading again today with price recovering further off the 1.2438 lows to trade 1.2489 last. The latest UK data, released today, has given further support. Monthly GDP was seen rising 0.3% over the 3 months to May, well above the expected 0.11% increase the market was looking for. Trade balance data also showed a narrowing of the deficit in May while construction output was seen jumping 1.7%, again, well above the projected 0.9% rise.
Risk assets have been lower today also, failing to take advantage of USD weakness. Expectations of Fed easing have kept SPX500 well supported over recent weeks. If we see a dovish set of FOMC minutes later today, we could see a return to the rally. However, should the minutes cast any doubt over the prospect of a July hike, we could see the market coming off further. SPX500 trades 2973.73 last, still above the 2963.89 level for now.
Safe Havens Weaken
Safe havens have added to the incongruity of the moves we have seen so far today with both JPY and gold down, despite USD weakness and softer equities prices. XAUUSD remains above the 1382.06 support for now, trading 1392.40 last. USDJPY trades 108.94 last as price continues to hold above the recently broken 108.78 level, keeping focus on further upside in the near term.
Crude Rises On Further Inventories Drawdown
Oil has had a much stronger week so far, following the sell-off last week. Yesterday, the API reported a heavy drawdown in US crude stores, which has supported price. If the move is confirmed by the EIA’s report later today, this could be strongly bullish for oil. Crude trades 59.06 last, with price having broken above the 57.85 level and now heading back up towards the 60.00 region.
BOC in Focus
USDCAD has had a subdued morning with price remaining capped by the 1.3136 level so far. A weaker USD, as well as stronger oil prices, have quashed the recovery for now. The main focus for CAD traders today will be the BOC meeting. The bank is not expected to adjust policy though there are upside risks in terms of the outlook and forward guidance in light of recent positive economic developments.
AUDUSD has traded higher over the European session so far on Wednesday, taking advantage of a lower USD. RBA cuts, as well as the recent move lower in gold, have weighed on AUD over recent weeks though optimism around a potential US/China trade deal is keeping the pair underpinned. For now, AUDUSD remains below the .6940 support having reversed sharply from highs above .70 last week.