Dollar Off Highs Ahead of June FOMC Tonight
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FOMC Up Next
The US Dollar is on watch today as traders brace for the June FOMC meeting this evening. The meeting, which will be the first under new chairman Kevin Warsh arrives against a changing macro backdrop with crude prices plunging on the back of the US/Iran deal news announced this week. Market pricing for a hike by year end is currently around the 60% mark, down from 70% at its peak a fortnight ago. The main driver of the hawkish Fed view is the ongoing inflationary risks linked to the Iran war and elevated energy prices. However, with the US and Iran expected to sign off on an initial deal on Friday crude prices are falling sharply and are forecast to fall further.
Changing Inflation View?
The impact on the inflation outlook raises the question of whether the Fed will still need to hike late this year if energy prices cool and inflation starts to fall back. With this in mind, traders will be keen to hear from the new Fed chairman tonight, particularly his views on inflation risks in the light of the newly announced peace deal and falling energy prices. Warsh is likely to highlight the importance of incoming data given the changing picture with Iran and as such there are downside risks for USD today if we see market pricing for year end rate hikes cooling in response to the meeting and Warsh’s guidance.
Technical Views
DXY
The rally in the Dollar has stalled for now into the latest test of the 100-mark with price pulling back from the level this week. While above 99.15, however, and the bull channel lows focus is on a fresh push higher and a breakout towards 101.91 next. If we slip back below that level though, focus turns to 98.24 as the next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.