Major data was light through much of yesterday but US home sales figures and consumer confidence data were both firmer than expected, interestingly this was not enough to lift the USD index, which measures the greenback’s performance against a basket of currencies, perhaps some hesitation ahead of this evening’s FOMC announcement which concludes their two day meeting. The USD has outperformed almost all of its G20 counterparts through July, as labour markets rebounded from extreme NFP lows and data improved versus expectation against many key readings, from housing to confidence to inflation figures. Despite this pickup in data, the FOMC are expected to remain on hold this evening with no immediate change to policy, however the market is keen to find out if/when they will look to raise rates next, and having already readjusted their forward guidance several times this year, further hesitation could see the USD give back some of July’s gains.
The big question for the Fed is do they want to raise rates again when many major central banks are discussing increasing easing. The BOE are potentially looking at rate cuts and additional QE, the ECB remain ready to act and increase/extend their QE program while interest rates hold in negative territory, the BOJ are expected to increase their easing, while both the RBNZ and RBA have both sounded slightly more dovish in recent months, the Riksbank continues to ease alongside European counterparts. These are just a few of the global central banks striking cautious tones, do the Fed want to be the only ones breaking the mold, especially with a contentious Presidential Election. EURUSD remains within its broader range, despite breaking lower towards the latter part of last week we held 1.0960 level on a close ad this level continues to provide support, 1.1140 should hold short term moves but the topside of the 1 month range up to 1.1186 is at risk should the Fed continue to strike a cautious tone. GBPUSD finds support at 1.3062, upside resistance towards 1.3162 and 1.3276 above will likely provide sellers.
UK GDP just released was marginally better than expected with annualised growth at 2.2% vs 2.1% expected, and .6% growth through Q2 vs .5% expected the Q2 figures however only account for a marginal impact of the Brexit result, although would indicate there was little if any slowdown into the EU referendum. The PMI data from last week is more current in our view and while this figure may give GBP some short term lift, we feel this just provides more opportune times for GBP sellers.
Later in the day the US session will be looking at June’s durable goods orders, while the FOMC meeting this evening will really take much of the attention.