- AUD/USD is trading in a bear trend below the 100 and 200-day simple moving averages (SMAs). However, this September the Aussie has been rebounding sharply. All eyes will be on the FOMC at 18:00 GMT. The market has already priced in a 25 bps rate cut.
Jerome Powell, Chairman of the Federal Reserve System, will be delivering his remarks on the monetary policy outlook at a press conference following the 2-day meeting of the Board of Governors. Powell's speech today (September 18, 2019) will start at 18:30 GMT.
The price of oil has fallen in recent trade, down over 1.4% at the time of writing having travelled between a range of $59.41 and $57.72. Indeed, Yemen's Houthi rebels, who are backed by Iran, say they were responsible for the drone strikes have warned of more to come and the market is on edge.
Trump and the UK have discussed a 'united diplomatic response' to the Saudi Arabian attack which is contrary to the belief that war could be averted. West Texas Intermediate crude for October delivery dropped 65 cents, or 1.1%, to $58.69 a barrel on the New York Mercantile Exchange, after shedding 5.7% on Tuesday.
Analysts at MUFG Bank explained the Pound continues to benefit from hopes about a last minutes Brexit deal and another Article 50 extension. They expect the Bank of England to keep policy unchanged on Thursday.
- USD/JPY is trading in a bear trend below the 200-day simple moving averages (SMA). However, in the last two months, USD/JPY had a substantial advance which is now challenging the 100 SMA and the 108.00 handle.
Data released today in Canada showed the CPI dropped 0.15 in August (vs +0.2%). Analysts at CIBC, consider that for the Bank of Canada, inflation isn't running too hot or too cold, it's just right.
The Federal Reserve is widely expected to lower the Fed Funds rate by 25 basis points to 1.75 - 2.00% range. It would be the second rate cut since the 2008 financial crisis. If the central bank delivers as expected, the statement and Powell’s words will be watched closely for clues about the future path of monetary policy, on how the “mid-cycle adjustment” would continue.
Critical developments took place over the last hours, with one of the including the Fed. The attack on Saudi’s oil installations pushed oil prices sharply higher (then retreated significantly) and increased geopolitical concerns. Another event was the increase in US money market rates. Repo rates spike up to 10% and the New York Fed responded and made $75bn available through a repo auction, an operation not used at such scale since 2008. If the Fed does not mention, Powell will be asked about the event.
“Market pricing for the September FOMC event has turned less dovish recently on...
- The common currency, on the daily chart, is trading in a bear trend below its main daily simple moving averages (DSMAs). Investors will monitor the FOMC this Wednesday as market participants have already priced in a 25bps rate cut.
- EIA reports an increase of 1.1 million barrels in US crude oil stocks. WTI continues to fall toward the $58 handle. US Dollar Index remains stuck in daily range as focus shifts to FOMC.
European Central Bank Governing Council member and Bank of France Head Villeroy de Galhau crossed the wires in the last minutes saying that the ECB's non-standard policies had been effective but added that they could also create a mistaken illusion that the policy is "omnipotent."
"It is up to political leaders to restore the confidence they have undermined," Villeroy argued. "Europe needs to make greater use of the scope it has to respond to the slowdown."
The EUR/USD paid no attention to these comments and was last seen trading at 1.1063, losing 0.07% on the day.
- DXY (US Dollar Index) is trading in a bull trend above the main daily simple moving averages (DSMAs). The Greenback has been trading in a range in the last two weeks. Traders will be watching the FOMC closely for fresh directional clues. The market has already priced in a 25 bps rate cut.
A spokesman for Saudi Arabia's defense ministry in a press conference on Wednesday said that all military components retrieved from the Aramco facilities suggested that Iran was behind the attack.
"Attacks could not have been launched from Yemen," the spokesman added. "The investigation still underway to determine the exact origin of the attacks on Aramco. We will announce a conclusion of the investigation on the origin of the attacks in the future."
These remarks failed to impact the market sentiment and the 10-year US Treasury bond yield was last at 1.757%, losing 2.6% on a daily basis.
Data released today showed that Housing Starts jumped 12.3% in August, to the highest annual rate since 2007. Analysts at Wells Fargo, point out the headline was boosted by a surge in apartments, but noted single-family starts were also strong. They see higher sales and builder optimism points to further improvement.
- Tensions remain high in the Middle East following the attack on Saudi oil facilities. 10-year US Treasury bond yield loses more than 2% on Wednesday. US Dollar Index struggles to find direction ahead of the FOMC's interest rate announcement.
- The Sterling is trading in a bear trend below the 100 and 200-day simple moving averages (SMAs). However, GBP/USD is rising sharply as the market is challenging the 1.2500 handle and the 100 SMA. The FOMC decision will likely lead to high volatility. The market has already priced in a 25 bps rate cut.
According to the latest GDPNow report published by the Federal Reserve Bank of Atlanta, the real GDP in the US is expected to expand by 1.9% in the third quarter of the year.
"The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2019 is 1.9 percent September 18, up from 1.8 percent on September 13," Atlanta Fed said in its publication.
"After yesterday's industrial production release from the Federal Reserve Board of Governors, and this morning's new residential construction report from the U.S. Census Bureau, increases in the nowcasts of third-quarter real consumer spending growth and third-quarter real private fixed investment growth were slightly offset by a decrease in the nowcast of third-quarter real net exports."
The weekly report published by the US Energy Information Administration (EIA) revealed that commercial crude oil inventories in the US increased by 1.1 million barrels in the week ending September 13 compared to analysts estimate for a draw of 2.5 million barrels.
The market reaction to the EIA report was relatively muted and the barrel of West Texas Intermediate was last seen trading at $58.40, losing 0.6% on a daily basis.
US President Trump on Wednesday announced that he selected Robert C. O’Brien, the State Department’s chief hostage negotiator, as the next national security adviser.
"I am pleased to announce that I will name Robert C. O’Brien, currently serving as the very successful Special Presidential Envoy for Hostage Affairs at the State Department, as our new National Security Advisor," Trump tweeted out.
"I have worked long & hard with Robert. He will do a great job!"
There was no market reaction to this announcement and the 10-year US Treasury bond yield was last down around 2% on the day at 1.767%.
- Energy shares lead losses as oil continues to correct Monday's rally. Markets expect the Fed to announce 25 basis points cut to the policy rate. US President Trump says they will increase sanctions on Iran.
- WTI adds to Tuesday’s losses around the $58.00 area. The API reported a nearly 0.6 million build on Tuesday. The weekly report on crude supplies by the EIA coming up next.
The USD/CHF pair held on to its goodish intraday gains and is currently placed near multi-week tops, around mid-0.9900s, as investors start repositioning for the highly anticipated FOMC monetary policy decision. The mentioned region marks a confluence resistance - comprising of 50% Fibo. level of the 1.0238-0.9659 and the very important 200-day SMA - and is followed by the top end of a six-week-old ascending trend-channel. Meanwhile, technical indicators on hourly/daily charts maintained their positive bias and support prospects for a further appreciating move, though bulls are likely to wait for a sustained move beyond the trend-channel resistance. The mentioned barrier- currently near the key 1.0000 psychological mark - coincides with 61.8% Fibo. level, which if cleared might be seen as a fresh trigger for bullish traders and set the stage for a move up towards the 1.0100 handle. On the flip side, immediate support is pegged near the 0.9925...
Analysts at TD Securities note that Canada’s headline CPI was slightly weaker than expected in August with prices down 0.1% on the month which pushed inflation to 1.9% from 2.0% in July (market: -0.2%, 1.9%).
- EUR/USD dropped and rebounded from lows near 1.1030. EMU final CPI fell in line with the preliminary readings. The Fed is expected to reduce the FFTR by 25 bps later today.
- Housing starts and building permits in the US rose more than expected. Trump said he instructed Secretary of Treasury to increase sanctions on Iran. US Dollar Index stays calm below 98.50 ahead of the Fed's policy announcements.
The GBP/USD pair held on to its weaker tone through the early North-American session on Wednesday, albeit has managed to recover few pips from daily lows. With investors looking past the latest Brexit optimism, the pair continued with its struggle to find acceptance above the key 1.2500 psychological mark and retreated from multi-week tops amid a modest pickup in the US Dollar demand. The intraday slide accelerated further following the release of softer-than-expected UK consumer inflation figures, though lacked any strong follow-through selling.
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