Forex today: Dollar backtracks on Fed’s preferred rate of inflation measure miss

• The US Dollar moved down to test the 98 level but GBP stole the show again.
• Markets get set for the Federal Reserve interest rate decision.  
• Eyes will now turn to Q2 CPI and Chinese  PMIs.

Forex today was another whitewash for the Pound as a no-deal Brexit becomes an increasing possibility that markets are positioning for which has sent the Pound over 2% lower at the start of the week. Sterling collapsed on Tuesday following  PM Boris Johnson saying  that Britain would leave the EU without a deal on 31st October if there are no changes made to the  existing withdrawal agreement.

Meanwhile, as we await the outcome of the Federal Reserve and today’s Aussie Consumer Price Index and Chinese PMIs, Trump opened his big mouth and disrupted whatever optimism there might have been with respect to the trade negotiations that have got underway in Shanghai this week.  Trump is annoyed that China is not playing ball and expressed his frustration speaking to reporters and across Twitter.

China has not begun buying large amounts of American farm products yet which was promised to US farmers after a June meeting with Chinese President Xi Jinping. This was an agreement made from a  meeting in Osaka, Japan where Trump  had agreed to postpone tariffs on an additional $300 billion of Chinese products and allow American firms to resume sales of nonsensitive goods to the Chinese telecom firm Huawei.  

“I think the biggest problem to a trade deal is China would love to wait and just hope,”  Trump said. “They hope  it’s not going to happen, I hope, but they would just love if I got defeated so they could deal with somebody like Elizabeth Warren or Sleepy Joe Biden or any of these people, because then they’d be allowed and able to continue to rip off our country like they’ve been doing for the last 30 years.”  

Meanwhile, the Dollar took a hit on the back of  the U.S. data pointed to muted inflation. The Commerce Department said that the Federal Reserve’s preferred inflation measure only rose 0.1% in June and was up 1.4% from a year earlier; This came in the form of the Personal-Consumption Expenditures, (PCE), and well below the 2% Fed target. However, there should not have been any surprises there although it certainly underscores the notion of a Fed cut.  

Currency action:  

“EUR rose from 1.1135 to 1.1160. USD/JPY fell from 108.70 to 108.45, the BoJ’s unchanged stance yesterday supporting the yen. AUD extended a two-week old slide to 0.6869 – the lowest since 19 June. NZD similarly fell to 0.6602 – the lowest since 10 July. AUD/NZD broke below 1.0400 to 1.0390. GBP was slammed again, trading below 1.2150 in the Asian time zone,” analysts at Westpac noted.  

Key notes from Wall Street:  

• Wall Street ends with benchmarks in the red ahead of Fed on trade war pessimism

 Key events ahead in Asia:

• When are China’s official PMI and Aussie CPI data and how could they affect AUD/USD?