Forex Today: Lira dumped on Trump sanctions risk; UK CPI, FOMC in spotlight

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Forex today witnessed tight trading ranges in Wednesday’s Asian trading, as a sense of calm prevailed ahead of the key Federal Reserve Open Market Committee’s (FOMC) interest rate decision. Meanwhile, the Asian equity markets cheered the risk-on rally induced by the revived US-China trade optimism and the European Central Bank (ECB) President Draghi’s rate cut talks.

Across the fx space, the Yen picked up mild bids on reports that a rocket hit the site of foreign oil firms’ headquarters in Iraq’s Basra. Therefore, the USD/JPY pair ran through offers and turned lower towards the 108.30 region, having consolidated near 108.60 levels in early trades. The Aussie remained on the back foot near 0.6875 region, despite risk-on and higher iron-ore prices, as dovish RBA minutes and latest trade-related headlines overshadowed. The Kiwi was better bid above the 0.65 handle after New Zealand’s (NZ) current account deficit narrowed, but the gains were capped ahead of the Fed and NZ Q1 GDP report. Meanwhile, both the European currencies, the EUR/USD pair and the Cable traded flat, awaiting fresh incentives from the key UK data and political updates while the dust settled over the dovish Draghi aftermath. The Turkish Lira emerged the biggest loser on the US President Trump’s sanctions threat.

On the commodities space, Gold prices on Comex kept its range near 1250 levels amid pre-Fed caution trading while both crude benchmarks failed to benefit from the Iraq explosion news and traded almost unchanged on the day.

Main Topics in Asia

The Times: UK’s Corbyn to back second Brexit referendum – Reuters

Trump’s team found removing Powell would be highly questionable

US Pres. Trump: “We will have a fair deal with China or no deal at all”

Japan’s 10-year bond yield hits lowest since August 2016

AUD Bullish: PBOC injects CNY 240 bln via one-year medium-term lending facility

Dalian iron ore jumps 6% to record highs on fresh trade optimism, will it help the Aussie?

USD/IDR: Bears await Bank Indonesia decision to extend downpour beneath 200-DMA

China’s CommerceMin: Will maintain anti-dumping and anti-subsidy measures on the US distillers grains

Gold risk reversals: Bullish bias is strongest since November 2009

Rocket hits a foreign oil company headquarters in Iraq’s Basra, Oil unfazed

WTI struggles to hold API-led recovery, geopolitics/EIA data in the spotlight

Trump said to be considering fresh sanctions on Turkey, Lira tumbles

Key Focus Ahead

A busy EUR calendar up for grabs, kicking-off with the German Producer Price Index (PPI) due at 0600 GMT, soon followed by the Eurozone current account data dropping in at 0800 GMT. The main focus in the session ahead is likely to be the UK data flow slated for release at 0830 GMT that includes the key May Consumer Price Index (CPI), Producer Price Index (PPI) and Retail Price Index. Markets will also look forward to the developments surrounding the UK political scenario, with the third ballot on the Conservative Leadership contest due later today. Also, of note remains the Eurozone construction output data at 0900 GMT that will be published alongside the speeches by the EU Chief Juncker and ECB policymaker Lautenschlager. At 1000 GMT, the UK CBI Industrial Trends Survey will be also eyed.

The NA session also remains a hectic one, with the Canadian Consumer Price Index (CPI) report due to be released at 1230 GMT, followed by the Swiss National Bank (SNB) quarterly bulletin at 1300 GMT. We have the ECB President Draghi speaking for the third straight day on Wednesday, as he will deliver the closing remarks at the ECB Forum in Sintra at 1400 GMT. The US EIA weekly crude stockpiles data will drop in at 1430 GMT.

The main event risk for today remains the Federal Reserve Open Market Committee’s (FOMC) monetary policy decision due to be announced at 1800 GMT. The Fed is likely to stand pat on its interest rates, but will likely indicate rate cuts on the cards in the coming months amid dwindling global growth outlook, slowing inflationary pressures and trade war.

EUR/USD: ECB rate cut bets rise, focus on Fed

EUR/USD will likely trade on the defensive ahead of the Fed, courtesy of rising odds of rate cuts by the European Central Bank (ECB). The ECB President Mario Draghi hinted at more stimulus on Tuesday, sending the EUR lower across the board. 

GBP/USD: Modestly flat as markets await UK CPI, politics ahead of the Fed

The Cable traders remain cautious ahead of British CPI, Tory leadership contest and FOMC as the spot trades modestly flat heading into the London open on Wednesday.

FOMC preview: No rate cut expected – Societe Generale

The Societe Generale Analysts offer a sneak peek at what to expect from the Federal Open Market Committee (FOMC) June monetary policy decision that will be announced on Wednesday at 1800 GMT.

New Zealand Q1 GDP Preview: reaction or overaction?

Gross domestic product is projected be 2.4% y/y in the first quarter slightly ahead of the 2.3% rate in the final quarter of last year. Quarterly GDP is expected to gain 0.6% in the first quarter the same as in the previous period.

BOE: No rate hike likely this year on no-deal Brexit risks – Citibank

Analysts at Citigroup argue that the Bank of England (BOE) is likely to refrain from raising interest rates in the coming months amid looming no-deal Brexit risks, which is likely to keep the GBP undermined.

 

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