USD Weakens Ahead Of The FOMC

FOMC On Watch

The US dollar has been a little softer over the European morning today as the market awaits the June FOMC due later today. While the Fed is not expected to cut rates, traders will be looking for a clear signal that a rate cut is coming in the near term. This should send USD index back below the 97.10 level where it is currently hovering.

EUR Down on Draghi Easing Signal

EUR/USD has posted a mild recovery today, benefitting from a weaker USD. However, the overall tone remains heavy following comments from ECB’s Draghi who said that the ECB has “considerable headroom” to ease further if the economy warrants so in the coming months. The comments were enough to send EURUSD down below 1.12, However, today the pair is holding just above that level.

GBP Recovers, BOE in Sight

GBP/USD has posted a recovery today also as USD weakness ahead of the FOMC underpins the G10 bloc. Looking ahead, however, the BOE meeting on Thursday is unlikely to do much to sustain this recovery. There is the risk of a further push lower should the BOE effectively rule out rate hikes until next year. GBPUSD remains below the recently broken 1.2604 level for now.

SPX500 Pauses Following Rally

Risk assets have been a little muted today following a large rally yesterday in response to Draghi’s easing comments. A dovish tone from the FOMC later today could add further fuel to the fire, however. The SPX500 is currently sitting at 2920.38, just below the 2939.87 resistance level.  Alternatively, if the market is disappointed tonight by a lack of dovish signaling from the Fed then we could see risk assets retreat.

Gold and JPY Rally

Safe havens have both been higher against the US dollar today ahead of the FOMC later.   XAUUSD trades 1342.99 last with price still capped by 1346.97 resistance for now. USDJPY trades 108.39 last, with price still capped by the 108.75 level resistance following two attempts over the last week.

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