USD Down Following Flat FOMC

The US dollar has recovered so far across the European morning on Thursday following a sharp sell-off last night in reaction to the December FOMC meeting. The Fed kept rates unchanged, as expected. But, it seems traders were disappointed by the lack of hawkish signals.

Although the statement itself was a little more positive than last time, there was not much in the way of new information. The Fed said that current policy levels remain appropriate. However, it will be monitoring incoming data. USD index trades 97.17 last, up off the post-FOMC 97.01 lows.

ECB On Watch

EURUSD is retreating so far on Thursday as the recovery in USD weighs on price. Looking ahead today, the main focus is the ECB meeting which will be the first headed by new ECB chief Lagarde.

We expect no policy changes. However, traders will be keen to hear Lagarde’s outlook to judge whether we are likely to see ECB easing in Q1 2020.

So far, Lagarde has said that the ECB will remain committed to achieving its inflation target. This supports the view that she will continue with Draghi’s easing program. As such, any dovish guidance from Lagarde today will likely weigh on EUR. EURUSD trades 1.1126 last.

All Eyes on UK Elections

GBPUSD has paused near recent highs as the UK takes to the polls today. The outcome of these elections will have a direct impact on the outlook for Brexit.

It could cause significant volatility in GBP if we see anything other than a clear Conservative party win, which would keep GBP supported. While polls continue to point to a win for the Tories, the specter of recent political shocks is present and caution is advised today. GBPUSD trades 1.3204 last.

Risk Sentiment Remains Firm

Risk assets remain buoyant on Thursday morning as the Fed delivered a fairly muted meeting statement reiterating its message that it will remain on hold for now but will be monitoring incoming data. The meeting was kept the door to further easing still ajar, seeing SPX500 trading back up to 3147.83 last.

JPY & Gold Lower

Safe havens have been weaker so far today, weighed on by a stronger US dollar and better risk appetite. XAUUSD trades 1473.09 last, retreating from yesterday’s post-FOMC highs.USDJPY trades 108.68 last, making its way back up off yesterday’s lows.

Crude Shrugs Off Bearish EIA Report

Oil prices remain supported today. Despite the EIA reporting another rise in US crude stores last week, it seems that the recent OPEC cuts along with optimism over a US-China trade deal are helping keep crude sentiment positive. Crude trades 58.96 last, holding just below the 60 level for now, in the upper part of the recent bullish channel.

Loonie Breaks Support

USDCAD has had a quiet morning so far but is attempting to break higher. For now, price is sitting at the bottom of the heavy declines seen yesterday which took the pair back down below the 1.3207 level to trade 1.3170 last.

AUD Holding Near Highs

AUDUSD has been a little flat over early European trading today though remain supported near yesterday’s highs. The sell-off in USD helped AUD rally firmly yesterday trading up to highs of .6889 before softening a little. With optimism over a US/China trade deal there is room for a further push to the upside if new US tariffs are postponed this weekend.