The greenback first advanced yesterday on positive expectations for the FOMC but handed over its gains touching its lowest level in more than a year vs. a basket of major currencies after the U.S. Federal Reserve indicated it could keep to a slow path of monetary tightening with the run off starting “relatively soon.”. FOMC’s statement followed a two-day policy meeting that ended yesterday where the Fed. left interest rates unchanged. On another note, the dollar was negatively affected as investors also continued to focus on the investigation into alleged relations between Russia and U.S. President Donald Trump’s administration in last year’s election.
On the release front, markets are awaiting the U.S. Durable goods and weekly jobless claims.
The common currency took advantage of the weakness in the greenback and edged higher to $1.1777, its highest levels in about two years. Due to the lack of data from the euro zone, the euro otherwise seemed to lack direction. On the data front, the Spanish unemployment rate and the German GfK consumer climate are due today, with the latter expected to increase to 10.7 from 10.6.
Sterling held its ground yesterday to at the $1.3010 level after data showed that the UK economy grew by 0.3% in the second quarter of the year compared to 0.2% in the first quarter, matching the forecast. There was a decline in industrial production and construction while the services sector posted a growth. The weak figures have dampened hopes for a rate hike from the BoE. CBI realised sales data is on the tap today with a fall of 12 to 10 expected. JPY
The Japanese currency took advantage of the weakness of its American peer. No major reports are out of Japan but it appears that risk-taking continues to play a part in the low yield currency. With no reports out from Japan, market sentiment is expected to drive the direction of the yen pairs around.
Gold edged higher yesterday for the second day in a row, touching a six-week high, as traders went to the precious metal as the Greenback declined to a 13-month low after the Federal Reserve kept its benchmark policy rate unchanged and said it’s “monitoring inflation developments closely.”
The precious metal increased by 0.3% to settle at $1,264.31 and the U.S. gold futures for August delivery edged up 1.2% to $1,264.
Oil prices traded near 8-week highs yesterday, after U.S. government figures showed that crude supplies declined for a fourth week in a row. Oil prices boosted as a much steeper than expected decline in U.S. crude oil inventories could reduce global oversupply. On the other note, Saudi Arabia said on Monday it would reduce oil exports to 6.6 million barrels per day in August.
As a result, U.S. West Texas Intermediate futures (CLc1) surged by 1.8% or 86 cents to settle at $48.75 a barrel, while Brent crude futures (LCOc1) rose as much as 1.5% cents or 77 cents to settle at $50.97 a barrel.
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