By: Andria Pichidi
FX News Today
- Stock markets continued to rally in Asia, underpinned by hopes of further easing and progress on the trade front at the G-20 meeting and European stock futures are moving higher in tandem with US futures.
- The BoJ left policy settings unchanged, but highlighted downside risks, especially for overseas economies.
- Hopes of further central bank stimulus and progress on the trade front at the G20 meeting meanwhile are keeping stock markets underpinned and Nikkei and Topix moved up 0.32% and 0.64% respectively.
- The Dollar has rotated lower after the Fed.
- FOMC held rates steady as expected, but shifted to an unambiguously dovish gear, noting that “uncertainties about this outlook have increased” while issuing a larger than expected downgrade in the dots as Chairman Powell refrained from using “transitory” to describe low inflation, marking a downshift in the inflation view.
- Some follow-through Dollar selling looks likely even in the London interbank market though increasingly dovish arguments at the ECB and other major central banks should curtail the US currency’s downside potential.
- The WTI future is 54.67 trading at USD 54.57 per barrel.
- In Europe, the BoE is also widely expected to keep monetary policy settings unchanged, but markets will be looking for signs that the BoE will at least drop the tightening bias as the global backdrop deteriorates
Charts of the Day
- printed 1.1283 highs, up from opening lows of 1.1225. The modest rally has been attributed to position adjustments ahead and posts the FOMC announcement. Next Resistance for the asset holds at 1.1288 and the round 1.1300. Support is set at 1.1245-1.1254.
- The Canadian Dollar, was the biggest mover, dropping by nearly 1% in making a four-month low at 1.3223. A strong rally in oil prices has catalyzed a strong bid for the Canadian dollar. The WTI crude prices are up by nearly 3% since the Fed’s announcement and are up by 5.7% from week-ago levels. Hence since the pair has broken the Support at Friday’s low, the strong bullish mix of developments for CAD, opens the doors towards February-March lows, between the 1.3060-1.3140 area. Immediate Support meanwhile, is set at the round 1.3200 level.
Main Macro Events Today
- Retail Sales (GBP, GMT 08:30)
- UK sales are expected to slip -0.5% in May, with a big yearly slip at 2.7%, following a 5.2% figure for the April.
- Interest rate Decision and Conference (GBP, GMT 11:00)
- BoE should remain on hold now until the Brexit D-day, while the Brexit process has essentially been frozen in motion as the Conservatives go about the business of selecting a new party leader/prime minister. If the transition runs smoothly we could see another 25 bp hike quickly thereafter. The consensus forecasts suggest no change in the policy rate in this meeting and an unchanged 9-0 MPC voting.
- Philly Fed Manufacturing Index (USD, GMT 12:30)
- The Empire State index is estimated to fall to 12.0 in June from 17.8 in May, versus a 2-year low of 3.7 in March. The Philly Fed index is seen falling to 11.0 in June from 16.6 in May, versus a 33-month low of -4.1 in February. The producer sentiment readings all moderated through the turn of the year from elevated levels in response to global growth concerns, falling petroleum prices, fears about the ongoing trade war, and the partial government shutdown.
Support and Resistance levels
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