Trading momentum remains unclear on early Wednesday, mostly inactive, as market players await the Federal Open Market Committee’s (FOMC) monetary policy meeting announcements. That said, the cautious mood keeps the US Dollar and yields on the front foot while challenging other investment avenues like major currencies, commodities and Antipodeans.
Even if the US Dollar remains firmer, EURUSD prints a corrective bounce amid hawkish comments from the European Central Bank (ECB) officials and the upbeat German data. However, GBPUSD remains pressured for the fifth consecutive day as the UK inflation data came in softer than expected.
Further, USDJPY rises to a fresh high since November 2023 despite the Bank of Japan’s (BoJ) first rate hike in 17 years and the policymaker’s readiness for more rate increases to tame inflation. Additionally, Gold price seesaws within a weekly trading range while crude oil hovers near the 4.5-month high marked the previous day.
Elsewhere, BTCUSD bounced off a two-week low whereas ETHUSD licks its wounds at the lowest level since late February as traders seek more clues to reconfirm the previous bullish bias.
Following are the latest moves of the key assets:
With the recent strength in the US inflation, employment and growth numbers, not to forget Tuesday’s upbeat US housing market data, the US Dollar Index (DXY) prints mild gains during the five-day uptrend, making rounds to the monthly high by the press time. In doing so, the Greenback’s gauge versus the six major currencies track the yields as traders make peace with June rate cuts from the US Federal Reserve (Fed).
Apart from the Fed concerns and the US data, geopolitical woes emanating from China, Russia and the Middle East also underpin the US Dollar’s haven demand.
The same joins the US soft-landing concerns and doubts about the economic recovery in major economies, especially due to the higher rates, to add strength to the Greenback.
Even so, comments favoring a delay in the ECB’s rate cuts and upbeat German ZEW numbers join the latest confidence in the speeches from the policymakers to challenge the Euro sellers.
On the other hand, the British Pound (GBP) remains pressured as the softer-than-expected UK inflation joins the fears of the British economic slowdown to challenge the Bank of England’s (BoE) pushback to the rate cuts.
On a different page, NZDUSD and AUDUSD also bear the burden of the economic woes, especially amid China’s housing market conditions, while the USDJPY fails to justify the first rate hike in 17 years as traders appeared to have priced in the decision well in advance.
BTCUSD and ETHUSD pare recent gains despite the latest corrective bounces as crypto traders seek more clues to defend the previous run-ups backed by optimism surrounding the spot ETF approvals.
While ECB President Christine Lagarde’s speech and Eurozone Consumer Confidence could also entertain the momentum traders, major attention will be given to the US Fed’s monetary policy announcements. Not only the interest rate decision, which is likely to remain a non-event as it is widely known for holding the rates unchanged, but the dot plot and Fed Chair Jerome Powell’s speech will also be crucial to watch for clear directions.
Should the policymakers’ interest rate expectations suggest only 3 rate cuts in 2024, versus four, the US Dollar might extend the latest run-up. However, Fed’s Powell needs to defend the hawkish bias and not signal the need for rate cuts to defend the US Dollar bulls.
Alternatively, any discrepancies between the market’s hawkish Fed expectations and a dovish tone of Fed Chair Powell’s speech, and/or dot plot, won’t hesitate to pull the US Dollar back toward the previous lows.
May the trading luck be with you!
