Dollar Falls Following FOMC
Fed Holds Steady
The US Dollar is seeing better demand today after a sharp drop lower yesterday in response to the July FOMC meeting. The Fed held rates steady as expected with three members dissenting and voting in favour of a hike (more than the two the market was expecting). However, it was the post-meeting presser which caused the most market movement.
Lack of Urgency on Inflation
New Fed chair Kevin Warsh appeared to be signalling that higher US real yields were working in the Fed’s favour, which was interpreted as downplaying the need for the Fed to tighten. Warsh’s comments generally appeared to be a little less concerned with inflation or at least lacked the suggestion that the Fed was looking to crack down hard on inflation. In all, the meeting was less hawkish than many were expecting, despite three members voting in favour of a hike. As such, it might be that the minutes prove more hawkish, adding further clarity around rate expectations.
US Data Due
Looking ahead today, focus will be on the prelim 2Q GDP data as well as core PCE for June. Core PCE is expected to have cooled from the prior month which, if confirmed, should help dampen USD sentiment once again, opening the way for a reversal back down towards yesterday’s lows for the DXY.
Technical Views
DXY
For now, the index remains within the 100.18 – 101.91 range, still held within the bull channel. While price holds atop the 100 level, focus is on a continuation of the trend higher towards the 103.20 level next. To the downside, the channel lows and 99.15 level will be the next support area to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.