U.S. Dollar Trading (USD) the first of three big risk events this week overnight with the US FOMC Meeting resulting in no change to the US interest rates. The FED kept rates at 0.25% and the USD immediately rallied as traders read the statement and noted that the no new hints of QE3. The door is still open for more stimulus but it will require a further deterioration of US economic data. Looking ahead, Weekly Jobless Claims forecast at 370k vs. 353k. June Factory Order June forecast at 0.5% vs. 0.7%.
The Euro (EUR) the FOMC saw the EUR/USD drop to 1.2220 but so far in Asian trade we are drifting back higher ahead of the main risk event this week in the ECB meeting tonight. ECB President Draghi last week highlighted to the market something big was coming and so are expecting something substantial to be announced tonight. Failure will see 1.2000 tested and the bears take back control.
The Japanese Yen (JPY) shot higher after the FOMC decision not to increase QE in the US but the gains were capped at Y78.50 and we are under pressure in Asia again as the USD strength failed to flow over from the US session. EUR/JPY will be in play at the ECB meeting tonight.
The Sterling (GBP) GBP/USD fell back to 1.5600 after very weak housing data and manufacturing PMI overnight. The July UK manufacturing PMI came in at 45.4 vs. 48.4 previously. The GBP/USD and EUR/GBP will both be in play tonight at the BOE & ECB meeting. Looking ahead, Bank of England Rate meeting forecast to hold rates at 0.5% and keep their Asset Purchase Program at 375bn. Also ECB Rate meeting forecast to hold at 0.75% but all attention on the Press Conference held afterwards and what Draghi can deliver.
Australian Dollar (AUD) the AUD/USD rallied back above 1.0500 and hit day highs at 1.0540 before being reversed sharply after the FOMC to below 1.0500. The Asian market sold as well to 1.0440 but we are rallying back towards 1.0500 after retail sales and trade balance in June both beat expectations. The AUD/USD will take its cue from the stock market’s reaction to the ECB tonight and positivity may see new highs towards 1.0600 and year highs 1.0700.
Oil & Gold (XAU) Gold fell back to $1600 as the US FED didn’t loosen monetary policy further. OIL/USD was supported on the dip at $88 after the FOMC and is sitting back at opening levels.