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Dollar under pressure as focus shifts to FOMC meeting

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USD

On Tuesday, the Greenback continued to slump and was traded near a 13-month low vs. its major rivals, with investors believing that the Fed could keep interest rates unchanged at its two-day meeting ending this Wednesday.

Technically, Dollar could remain under pressure after today’s CB Consumer Confidence Data, with essential gains that could be on hold, especially with traders incited for tomorrow’s FOMC statement and the outcome of the upcoming meeting between Trump’s administration and Mueller’s team of investigators.

 On the data front, existing home sales data came in lower than expected at 5.52 million while the flash manufacturing PMI rose from 52.0 to 53.2, slightly higher than what the 52.3 forecast. Today, the CB consumer confidence index is on tap with a fall from 118.9 to 116.5 expected.

  • The U.S. dollar index (DXY), which measures the Greenback against a basket of currencies, fell slightly to 93.919, its lowest level since June 2016.

EUR

Common currency surged by 0.1% to $1.1655, not far from a high of $1.1684 set on Monday, its highest level in about two years. Meanwhile, markets are awaiting Germany’s IFO Business Climate Index figures, which is considered a key economic indicator for the Eurozone’s largest economy. A drop of 115.1 to 114.9 is anticipated. This could factor into ECB tapering expectations.

GBP

The Sterling Pound traded slightly high despite the lack of data from the United Kingdom. The CBI Industrial order expectations are due today with an anticipated fall from 16 to 12. In addition, Bank of England MPC member Haldane is due to speak, possibly reiterating his dovish views.

JPY

The Greenback declined by 0.1 to settle at ¥110.99, after touching a six-week low of ¥110.65 yesterday, as Japanese Flash Manufacturing edged higher to 52.2, above the estimate of 52.3 points. In addition, the U.S. Existing Home Sales unexpectedly declined to 5.52 million, well short of the estimate of 5.59 million.  The minutes of the Bank of Japan meeting were also released yesterday but this failed to awaken any volatility for the yen-crosses.

Gold

Earlier today, Gold prices held steady at $1,255.32, after hitting a 4-week high yesterday, boosted by political uncertainty in the US and a weak U.S. Dollar, which held near a 13-month low.  Meanwhile, markets are awaiting the Federal Reserve meeting for clues on monetary policy, especially in light of interest rates. Technically, the yellow metal could remain high in short-term supported by a weaker dollar and safe-haven buying. US gold futures for August delivery surged by 0.1% to settle at $1,255.30 per ounce.

Oil

Oil edged higher yesterday, following the news   that the world’s largest oil exporter, Saudi Arabia vowed to reduce its exports to 6.6 million barrels a day in August. In addition, Nigeria agreed to cap output once its production settles at 1.8 million barrels a day.

Furthermore, at a meeting held yesterday in St. Petersburg, the oil minister reported that global inventories have fallen by 90 million barrels over the January to June period but was still 250 million barrels over the five-year average, which is the target for Organization of the Petroleum Exporting Countries and non-OPEC.

Brent crude for September delivery rose as much as 28 cents or 1.1%, to settle at $48.88 a barrel and U.S. West Texas Intermediate (WTI) futures rose 28 cents to settle at $46.62.

The most important economic events:

  • USD Consumer Confidence (Jul): (GMT 14:00) – important – Forecast (116) – Previous (118.9).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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