Fed Fuels Easing Expectations
The US dollar continued to decline over the early European session on Thursday as the sell-off in response to yesterday’s FOMC minutes develops further. The minutes were decidedly dovish, noting that
“Many judged additional monetary policy accommodation would be warranted in the near term should these recent developments prove to be sustained and continue to weigh on the economic outlook.”
USD index trades 96.55 last as the rejection from the 97.10 level deepens. Looking ahead to today’s US session, the market is waiting for US CPI data which is expected to have ticked lower last month. This would weigh on USD further if confirmed.
EUR Down Despite USD Weakness
EURUSD has weakened today, despite the sell-off in USD. Concerns around the health of the eurozone economy, as well as expectations of forthcoming ECB easing, are keeping the pressure on EUR. Price trades 1.1268 last. This is well above the 1.1217 level.
GBP Rallies Following Better GDP Data
GBPUSD is fighting to stay above the 1.2439 lows. Price is currently printing a second consecutive bullish day on the back of USD weakness. Yesterday’s better than expected GDP print is continuing to provide upside impetus. However, in the face of growing Brexit uncertainty, any rally seems likely to be short-lived, keeping focus on further downside in the near term.
Risk Sentiment Boosted B Dovish FOMC Minutes
Risk assets have been well supported this week, with US equities receiving a mid-week boost from the set of dovish FOMC meeting minutes released last night. The market is now pricing in a .25% July rate cut. This has pushed the SPX500 back up to 3001.13 last, sitting just below all-time highs. The lingering prospect of fresh efforts to achieve a US/China trade deal is also helping to keep risk sentiment buoyant despite rising tensions in the Middle East.
Gold Rallies, JPY Drops
Safe havens have had a mixed day today. Gold prices have risen against the US dollar in the face of increased Fed easing expectations. On the other hand, JPY has weakened, as equity prices have climbed higher again. Price action over recent weeks suggests that gold is being traded less as a safe haven in terms of equities prices and more as a reflection of US interest rate expectations. XAUUSD trades 1423.30 last as price begins the climb back to recent multi-year highs. USDJPY trades 108.15 last as the bounce of 107.90 support continues.
Oil Supported by Bullish EIA Report & Middle East Tensions
Oil prices have been higher again today. Yesterday, the EIA reported a fourth consecutive weekly drawdown in US crude stores, which has alleviated concerns about the demand outlook. Tensions in the Middle East are also keeping oil supported as the UK and Iran clash following the seizure of an Iranian oil tanker by the UK last week and the attempted seizure of a British oil tanker by Iran yesterday. Crude trades 60.80 last, with price having broken back above the 60.07 level.
Commodity Currencies Rally
USDCAD has turned lower once again, crumbling under the pressure of a weakened US dollar and stronger oil prices. The Canadian currency is now trading back below the 1.3068 support and is challenging recent lows at the 1.3037 level.
AUDUSD has turned higher today, with AUD taking advantage of a lower USD and higher gold prices.For now, price remains below the .70 level but is quickly advancing and looks set to test the level yet again over the coming sessions.