USD Higher Despite Fed Easing Expectations

The US dollar has seen some net buying over the European morning on Tuesday following another weaker session yesterday. Despite some mild upside today, the main focus continues to be on expectations that the Fed will look to introduce fresh easing at some point over the coming months.

Indeed, the CME’s Fed-watch tool is now pricing a near 60% chance of a .25% cut in July and a roughly 40% chance of a .50% cut. USD index trades 95.54 last, with the price still hovering below the broken 95.72 level.

Looking ahead today on the data front US Consumer Confidence is the main focus while comments from Fed Chair Powell will also be watched by traders.

Euro Weakens on USD Strength

EUR/USD has softened today also, as a recovery in the US dollar takes the shine out of the recent rally. Outside of the support provided from recent dollar weakness, EUR has been under pressure given the expectations that the ECB will ease too. This is in line with Draghi’s projections over the last few weeks. EUR/USD trades 1.1383 last, with price having reversed from just shy of testing the 1.1424 level.

Pound Pushes Higher

GBP/USD has continued higher today as the recent rally back above the 1.2658 level support continues. The rally in GBP is likely being driven by speculation that Brexit could be pushed further back, or ultimately avoided altogether, given the current uncertainty within British politics. GBPUSD trades 1.2763 last, heading back up near the 1.28 level resistance.

Equities Traders Keep Focus On Fresh Easing

Risk assets have remained broadly neutral today following some softening yesterday as the market reacted to fresh US sanctions on Iran. While there is relief that military conflict has been avoided, for now, there is still concern over how Iran will deal with these sanctions. And the prospect of war remains very real. For now, SPX500 trades just atop the 2939.87 level, sitting just under the recent all-time highs seen in response to last week’s dovish FOMC.

Gold Surges Higher Again

Safe havens have had a mixed day today with gold trading higher against the US dollar while JPY has softened a little. XAUUSD tested the 1432.21 level overnight and is hovering just below the level now with gold demand remaining strong. The prospect of fresh easing from the Fed as well as the ongoing US/China trade war and the threat of a military conflict with Iran, are keeping gold well bid. USDJPY is sitting back above the 107.08 level this morning following a sharp break below the level yesterday. Despite minor USD strength today, focus remains on further downside.

Oil Boosted By Middle East Tensions

Oil prices have remained in the green today. Rising tensions in the Middle East are keeping speculative buyers interested in the risk of supply disruptions from Iran. Looking ahead, traders are waiting on the API report today (before tomorrow’s main EIA release) to see whether the prior week’s drawdown continued last week. Crude trades 57.91 last, sitting just below the 58.13 level.

Commodity Currencies Well Supported

USD/CAD has been lower today, despite some USD strength. Higher oil prices have boosted CAD, which has also drawn support from a more resilient tone from the BOC recently compared with the Fed and ECB for example. USD/CAD trades 1.3173 last.

AUD/USD continues its recovery rally today as the move off the .6865 base takes price up to .6971 last. Surging gold prices, along with higher equities and oil, have kept AUD underpinned despite expectations of further RBA rate cuts to come.