Uncertainty Rising Ahead of July FOMC Today
July FOMC Up Next
The Dollar is on watch today as traders brace for the July FOMC meeting. Going into the decision, market pricing for a hike is sitting around the 30% mark, reflecting an unusually high level of uncertainty among traders. Near-term rate hike expectations had been dashed through June and into July as a result of the heavy sell off in oil prices and the subsequent plunge in US inflation data. Traders took the view that should oil continue to fall (in response to growing optimism over a potential US/Iran peace deal0 then inflation too would continue lower, negating the need for the Fed to hike rates. However, in recent weeks, the re-escalation of the US/Iran conflict saw oil prices surging higher once again, lifting rate-hike bets along with them.
Forecasts for Today
In terms of market expectations for today, the base case scenario is for the Fed to hold rates steady with some members dissenting and voting for a hike. If see, this should keep USD underpinned for now with focus then turning towards an expected September hike. There will be no updated economic forecasts or dot plot projections at this meeting so all the focus will fall on the post-meeting presser. New Fed chairman Warsh has been keen to steer clear of offering forward guidance so far so traders will be carefully parsing his comments and answers looking for signals as to how the Fed might act. In particular, traders will be looking for the bank’s view on inflation risks if the Iran conflict isn’t resolved any time soon.
Technical Views
DXY
The rally in the index has stalled for now into the 101.91 level. However, price remains within the bull channel and while above the 100-mark, focus is on a continuation higher with 103.20 the next target for bulls.
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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.