Sterling Rises in Mixed Markets, Dollar Weak ahead of Fed

Sterling surges broadly in rather mixed markets today. Rebound in cross against Euro is seen as a major reason for the Pound’s strength. Australian Dollar is following as the second strongest for now, partly listed by cross buying against New Zealand Dollar. Kiwi and Swiss Franc are, on the other hand, the weakest. At this point, Dollar is still generally soft as focus turns to FOMC rate decision. As noted before, we’re not expecting anything spectacular in today’s announcements. Dollar could resume prior selloff after this event risk.

Technically, GBP/JPY recovers notably after drawing support from 4 hour 55 EMA. Focus is back on 136.62 temporary top and break will resume the choppy rise from 131.68. EUR/JPY is also drawing support from 4 hour 55 EMA at the time of writing. Strong rebound from current level will put focus back to 124.43 resistance and break will resume larger rise. Regaining strength in GBP/JPY and EUR/JPY could help push Yen lower. But USD/JPY needs to break 105.68 minor resistance to signal its following other Yen crosses higher.

In Europe, currently, FTSE is up 0.21%. DAX is down -0.12%. CAC is up 0.68%. German 10-year yield is up 0.0041 at -0.503. Earlier in Asia, Nikkei dropped -1.15%. Hong Kong HSI rose 0.45%. China Shanghai SSE rose 2.06%. Singapore Strait Times dropped -0.37%. Japan 10-year JGB yield dropped -0.0050 to 0.021.

US goods exports and imports rose in June, trade deficit narrowed to $70.6B

US exports of goods rose 13.9% mom to USD 102.6B in June. Imports of goods rose 4.8% mom to USD 173.2B. Trade deficit narrowed -6.1% mom to USD 70.6B. smaller than expectation of USD -75.5B.

Whole sales inventories dropped -2.0% mom to USD 629.6B, worse than expectation of -0.4% mom.

Fed to hold its cards until September

FOMC rate decision is a major focus today but there is little expectation on anything dramatic there. Fed funds rate will be held at 0.00-0.25%. The unlimited asset purchase program will continue at a pace of USD 80B for treasuries and USD 40B for MBS. There might be change to forward guidance though, to tie future rate hike to employment and inflation. But the big changes will be held until September.

By September meeting, Fed should have completed the policy framework review. Congress should have passed any additional fiscal stimulus. More information will be obtained regarding the economy, in particular with second wave of coronavirus infections in effect. Updated economic projections will also be completed.

Reprinted from actioforex, the copyright all reserved by the original author.

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