Daily Market Update

Fed Decision anxiety keeping markets quiet

June 19, 2019

The U.S. Dollar is holding steady ahead of the FOMC Meeting Announcement at 2PM, a much-awaited event that could signal if indeed the Federal Reserve feels it is necessary to start cutting interest rates right away or soon.

Overview

Recent data, from Housing to prices spent on investment, have not impressed and even Retail Sales are at low levels after improving by half a percent according to last week’s release.

Overall, things do seem to be slowing down and today’s tone could set the greenback for losses if more dovish than expected. Some economists have pointed out that the Fed could even indicate an interest in two cuts by December, something that in our eyes would certainly cause a rally against the buck. All flows ride on the statement and the press conference afterward. There was news of a meeting scheduled for President Trump and China’s Premier Xi Jinping, but this did not influence FX significantly.

 

What to Watch Today…

  • FED MEETING AND PRESS CONFERENCE 2PM

Complete Economic Calendar can be found here.

 

EUR

The Euro has lost 1.2% of its value in the past 12 days, attributing its misery on the determination shown by European Central Bank President Mario Draghi to help an ailing continent. As he has demonstrated in previous years, Draghi’s penchant for commentary on intervention has exacerbated doubts on euro prospects for appreciation. Another controversial development has been the proposal by Italy to use a currency parallel to the Euro, which has revealed that mafia and other criminals are already using old Italian Lira notes to conduct illicit business.

Today’s Fed decision could be a negative factor for the U.S. Dollar, but one that could prove temporary as it seems the ECB would like to follow suit and look to provide easing measures of their own. Interest rate cuts do not look possible since they are at 0.0% and deposit already in the negative.

GBP

The Pound gained ground against the buck following the results of the second round of voting for the Conservative Tory party as they choose their Prime Minister replacement for Theresa May. Boris Johnson seemed to be the clear winner as more than half the candidates failed to gain enough votes to continue campaigning.

Today’s Fed will take focus away from the race in England but expect Sterling to stay vulnerable to losses as inflation also showed further signs that Brexit must be resolved, with it falling to 2.0% from 2.1% as expected.

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