Dollar Drives Higher
USD has continued to rally firmly over the European morning in response to the FOMC rate decision last night. As was widely expected, the Fed cut rates by .25%. However, bulls were left disappointed by the forward guidance given by Fed’s Powell. The chairman said that the central bank doesn’t foresee this being the start of a lengthy easing cycle and instead, is likely just a “mid-cycle adjustment”. USD index trades 98.63 last with price having broken above the 98.26 overnight.
Euro Under Pressure
EURUSD has been shattered by the Fed rate cut announced yesterday. Price collapsed below 1.1130 support and is near approaching the 1.1027 support. Weak eurozone inflation data yesterday, along with a raft of weaker eurozone PMI sets today is keeping sentiment skewed heavily to the downside today.
BOE Keeps Rates on Hold
GBPUSD trades with a heavy tone today. While the BOE kept rates unchanged, in line with broad market expectations, downward revisions to the bank’s growth forecasts weighed on investor sentiment. Once again, the bank outlined the looming risks from Brexit as part of its decision. GBPUSD trades 1.2113 last with price struggling around the 1.2115 level, having briefly pierced below the level earlier today in reaction to the decision.
Risk Assets Disappointed By Fed Forward Guidance
Risk assets reacted with severe disappointment to yesterday’s US rate cut. The market had been anticipating a much more dovish tone from the Fed. They were caught offside by Powell’s downplaying of future rate cut odds. SPX500 reversed sharply from the 3019.15 level, breaking back under 3000 to test 2970.95 support, which is holding for now.
Safe Havens Mixed
Safe havens have had a mixed day against USD so far. While both were heavily weaker in response to the initial post-FOMC reaction, JPY has strengthened against USD while gold remains subdued. USDJPY trades 109.08 last. This is down from the initial 109.30s highs seen yesterday. XAUUSD trades 1406.59 last with price having traded heavily back below the 1433.48 level.
Crude Capped by FOMC
Oil prices have firmed again today following some initial weakness in the wake of a stronger USD. Crude trades 57.88 last with the market still supported by the EIA report yesterday. The report confirmed a seventh consecutive weekly drawdown in US crude stores. The ongoing decline in stores is helping alleviate concerns over the crude demand outlook which had been weighing on prices.
High Betas Back Under Pressure
USDCAD has softened a little today, as oil prices recover. However, price remains well supported on the back of yesterday’s explosive topside move. This saw price breaking out to its highest level since early June. Price trades 1.3216 last, with focus on further upside in the near term.
AUDUSD has posted a small recovery today on the back on the initial USD surge yesterday. AUD has also been under pressure from the lackluster conclusion to the first round of new trade talks between the US and China. While Washington has said that talks will continue in September, the lack of detail around the talks suggest that little progress was made. AUDUSD trades .6848 last, just up off the .6830 lows.