FOMC minutes release
General market theme
Currency markets remained in the same tune yesterday as we saw limited price action and volatility in the major instruments we monitor in our report. We’ve had a number of reports released yesterday but for the most part of the day traders disregarded them in order to trade on the back of the established biases on the euro and the pound that moved in opposite directions as their outlook diverges for the past few weeks.
Today the focus will turn mostly on the US dollar and the release of the minutes from the last FOMC meeting and the key for traders here is to assess whether the rest of the monetary policy committee share Janet Yellen’s bearish bias. If that’s the case then the dollar will suffer fresh losses across the board allowing the euro, pound and gold to benefit while the stock markets should also get a bump.
Price action highlights
The euro traded in a similar manner as in the last couple of days yesterday and even though the ISM report from the US printed better than expected the single currency showed increased resilience to remain afloat. This is a clear indication that traders are hesitating to back the dollar against the euro at this time and it has nothing to do with any hidden strength of the European currency, it has everything to do with dollar’s bearish outlook as most Fed officials sound concerned. If traders get a confirmation of that bias today from the release of the minutes from the last FOMC meeting but also from 2 Fed officials speaking in public then the 1.1400 level could be broken to the upside with 1.1500 being the next area of interest.
The cable was in the red for yet another day yesterday as the currency lost the 1.4200 area and traded as low as 1.4120. The bias is clearly to the downside as the pound disregarded the better than expected Services PMI report and it is clear that traders care less about the recent show of strength from key reports from the domestic market and that their focus is on the uncertainty ahead. As we move closer to the EU referendum and the Brexit remains a risk the pound will remain fragile. Next level of support is the 1.4050 lows
Focus of the day
The focus today will turn on the US dollar and the release of the minutes from the last FOMC meeting but also tow Fed officials speeches in public. The minutes will reveal the bias among the members of the FOMC committee back in mid-March when the meeting took place but today’s speeches will also offer a more up to date outlook on their views.
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