Fed To Cut By .25%
The US Dollar is trading with a bid tone ahead of the keenly-anticipated FOMC meeting later today. In line with data weakness and softer global economic conditions, the market is widely expecting the Fed to announce a fresh .25% rate cut. Yesterday the Fed ran its first repo operation in a decade in a bid to help keep US rates in the Fed’s targeted range between 2% and 2.25%. USD index trades 98.05 last, hovering below yesterday’s highs.
EUR Down On Dollar Strength
EURUSD continues to trade in a highly congested manner ahead of the FOMC today. Following the ECB’s recent easing announcement, price had spiked higher. Since then, it has reversed to settle back in the middle of the post-ECB range as traders await a fresh catalyst from the Fed. This could see price quickly back above the 1.1112 level if the Fed delivers on action and guidance.
UK Supreme Court Hearing Continues
GBPUSD has traded a little softer so far today though price remains supported above the 1.2382 level. The UK Supreme Court hearing regarding the legality of the PM suspending parliament continues today. There is still no sign as to which way the court will rule. If Johnson is ruled to have acted illegally, this could cause a further spike higher in GBP targeting a test of the bear channel top next.
Equities Traders Wait on The Fed
Risk assets have had a quiet session so far also as traders await the FOMC. Trump dialed back his initial “locked and loaded” rhetoric regarding the alleged Iranian drone strike on Saudi oil sites. He said that he does not want to go to war, which has helped curb risk aversion. SPX500 trades 3000.63 last with price hovering close to all-time highs at 3028.27.
Safe Havens Mixed
Safe havens have traded with a mixed tone over the European session so far on Wednesday with JPY lower against USD while gold has been a little higher. A better risk backdrop has seen a weakening of safe-haven inflows for JPY while gold prices remain bid in the face of an expected US rate cut later today. XAUUSD trades 1502.31 last. USDJPY trades 108.20 last, sitting just above the day’s lows.
Bearish API Sends Oil Lower
Oil prices have been lower again following the API yesterday reporting a surprise crude oil inventory build of 592k barrels for last week, in contrast to expectations of a 2.889 million barrel draw. Traders now wait for the headline EIA report later today. Saudi Arabia also announced that it had restored 50% of oil processing and will have the full capacity recovered by end of September, further weighing on oil. Crude trades 58.72 last, sitting back on the 58.57 support level for now.
USDCAD has had a subdued day so far though remains a little higher on the session. The pullback in oil prices yesterday has weakened CAD though upside moves in the pair have been tempered by expectations of a Fed rate cut later today. USDCAD trades 1.3265 last, mid-range between the 1.3207 and 1.33 levels.
Aussie Under Pressure
AUDUSD continues to weaken this morning despite the better risk backdrop and expectations of a Fed rate cut. The RBA meeting minutes this week have heightened expectations of a forthcoming RBA rate cut which is keeping AUD upside capped for now. AUDUSD trades .6834 last, testing the .6832 support level once again.