General market theme
At the beginning of the week price action in the major money markets was limited with volatility remaining at low levels since there was little in terms of fresh news to spark any serious trading action. However as we move further into the week we should expect more significant reports and news from the Euro area, the UK and the US so we believe that price action will become more attractive and traders will move on the opportunities that will arise. As we mentioned yesterday market participants are eagerly waiting for the Fed meeting on monetary policy tomorrow as it is the top priority news event of the week and the statement that will follow the meeting should affect dollar’s outlook for the next couple of weeks.
Price action highlights
The euro took to the upside yesterday in light of dollar’s continued weakness and even though the IFO Survey printed cooler than expected the European currency managed to print fresh highs above the 1.1250 area. However price action was limited and investors are looking towards the Fed meeting tomorrow to dictate price action in the euro, should the Fed appear concerned and leave little room for a June rate hike then the euro will rally higher while on the opposite case a dollar rally will kick off. For the day ahead there are no euro-related reports or news so the single currency will take its cue from the US dollar.
The cable continued on the same tune yesterday and reached the 1.4500 level as the pound remains well bid even though the fundamentals do not support such a rally for the British currency. It seems that what has been happening in the past couple of weeks is a steady short-covering action where investors that have betted in favor of a Brexit are now unwinding their short positions as the Remain vote appears stronger. Like the euro, there are no reports from the UK today so the US dollar will be in the driver’s seat for the next 24 hours.
Focus of the day
The Durable Goods Orders and the Consumer Confidence figures appear as the important news items of the day along the Services PMI reading from the US as the dollar will be dictating the price action in the major instruments today. However we need to note here that we don’t expect too much of a reaction from the US currency today as investors will most likely be cautious ahead of tomorrow’s Fed meeting.
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