FOMC In Focus
USD remains supported ahead of the FOMC meeting later today. The market is widely expecting the Fed to announce a .25% rate cut along with guidance for further easing over the remainder of the year. There is still a risk that the Fed goes for a larger .50% cut. Although in line with recent data strength this risk seems largely diminished. With the rate cut priced in, the USD reaction is likely to depend on the guidance and other comments during the press conference after. USD index trades 97.84 last.
Euro Lower on Weak Data
EURUSD trades on a weaker footing today as weakness in eurozone inflation, released this morning, underpins expectations of ECB easing. Core inflation printed just 0.9% in July, highlighting the issues facing the ECB. EURUSD trades 1.1148 last, still sitting above 1.1130 support for now.
GBP Hanging On
GBPUSD has managed to stay in the green today despite the rising uncertainty around Brexit. The key focus for GBP traders will, of course, be the BOE rate decision due tomorrow. While the bank is not expected to adjust policy, there are risks of a more dovish outlook, specifically regarding Brexit risks. These are likely to weigh on price. GBPUSD trades 1.2163 last, trading just above 1.2115 support for now.
Equities Higher on Fed Rate Cut Expectations
Risk assets have been trading higher across the European session so far as traders brace for the FOMC later today. Expectations of a Fed rate cut have kept SPX500 well supported over recent weeks and with the Fed expected to outline the likely need for further easing over the year, the risks of a rally higher in equities are elevated. SPX500 trades 3016.18 last, just below the 3019.15 resistance.
Safe Havens Stronger
Safe havens have had a stronger day so far with both JPY and gold mildly higher against USD. Moves have been quiet and the main focus will be on the US rate decision later today which has the potential to support both gold and JPY. USDJPY trades 108.56 last with price straddling the middle of the 108.24–108.77 range. XAUUSD trades 1430.90 last with price still capped by 1433.48 resistance.
Crude Cruising Higher
Oil prices remain well supported today following yesterday’s report from the API which showed that US crude stores had fallen again last week. The market is now waiting on the headline EI report due later today. This could confirm a seventh consecutive week of drawdowns, which would be strongly bullish for oil. Crude trades 58.44 last, heading back up to test the 60 level next.
High Betas Back In Business
USDCAD has seen lower prices today. Yesterday, price traded back down below the 1.3145 level and is hovering around there so far today. CAD has been well supported by the recovery in oil prices while expectations of a Fed rate cut later today have the potential to further depress USDCAD. Price trades 1.3148 last.
AUDUSD has been a little softer so far today following explosive moves higher overnight in reaction to better than expected inflation data. Aussie CPI printed 1.6% in Q2, up from 1.3% prior and above the expected 1.5%. AUDUSD trades .6895 last, trading back up near the broken.6910 level.