- GBP/USD was a squeeze in NY on the back of the Brexit headlines
- Traders get set for the FOMC and the statement.
- Powell headlines sent the dollar n the march.
FX today was less about the Trump/NK summit and more about Brexit, US CPI and awaiting the central banks. U.S CPI was up a tic to 2.8% y/y enough to keep UST yields and USD supported ahead of Wed’s FOMC:
- FOMC Preview: hike on the table”¦ too little too late?
As far as Brexit developments went, May swerved a massive potential blow to her Brexit strategy where MPs turned down a plan that would have given parliament a veto on the final deal negotiated with Brussels. The House of Commons voted 324 to 298 to defeat an amendment to the EU Withdrawal Bill. Talks with Brussels have stalled over the fraught issue of the Irish border, but both sides are hoping to agree on a deal by October in time for the Brexit date of March 29th, 2019.
Then came headlines that Federal Reserve Chairman Jerome Powell is ‘considering’ holding a press conference after every policy meeting rather than every other meeting. This sent the DXY to the higher end of the 93 handle.
GBP/USD was a squeeze in NY on the back of the Brexit headlines and UK parliament where PM Theresa May avoided a major blow to her Brexit strategy on Tuesday. MPs rejected a plan that would have given parliament a veto on the final deal negotiated with Brussels but giving parliament greater say in any Brexit deal. Cable was better bid to 1.3424 after PM May won the vote in parliament, but the bid was shortlived as markets get set for the central banks. Cable subsequently dropped back to near 1.3390.
As for the other currencies, the single unit was rising within a European range of 1.1757-1.1809 with the DE/US spread tightening, (14bp since the end of May), and then the US CPI made for a choppy start in the US session. EUR/USD turned stationary around 1.1780 before the WSJ came with the Powell headlines that sent the dollar higher, sending the euro down to 1.1740. The euro closed at 1.1744. EUR/GBP was lost the 0.88 handle and fell from 0.8828 to the 100-hr SMA at 0.8994 on Brexit related noise with the UK winning the first vote to overturn the Lord’s defeat on the EU withdrawal bill by a majority of 22. The cross then went on to 0.8768 the session lows closing at 0.8781 in NY.
USD/JPY was unable to really take-off on the Powell headlines, stuck in a range between 110.10/50 still. However, the close above the 200-D SMA really sets up a solid foundation for a pounce higher on anything remotely more hawkish than expected from the FOMC statement and Powell’s presser.
The higher betas were under pressure. Commodities were heavy, with copper in continued sideways consolidation and WTI falling the last hours of the day. AUD/USD was in a chop after the US CPI and was taking on the daily cloud base and support in the 0.7555/60 zone towards the close. 0.7575 was the close.
Key notes from US session:
- Funda-FX wrap: Korean summit/Brexit/US CPI and FOMC noise
Key events ahead:
Analysts at Westpac noted that at 10:30am Syd/8:30am Sing/HK we see Australia June consumer sentiment from Westpac and the Melbourne Institute. “May’s reading was little changed versus April, despite a pickup after the federal budget. At 101.8, the headline index is barely above neutral,” the analysts explained.
Share
