FX markets steady ahead of US FOMC statement

United States Dollar:

It was another slow start to the week this week. GBP/USD started the day at 1.6980 and popped to a high of 1.6999 as the dollar softened throughout the day. The weak set of U.S. pending home sales data weighed on the dollar, with the index declining 1.1% from the previous month. Risk sentiment turned a little less negative too which helped. That said, the range in GBP/USD has still been pretty narrow as investors patiently await the US FOMC statement on Wednesday, arguably the biggest event of the week for financial markets. Meanwhile, the suggestion by the IMF yesterday that the pound was overvalued by 5-10pc failed to have an impact on cable. They said that it may hamper efforts to rebalance the economy but this has since been countered slightly by comments from the Bank of England’s Ben Broadbent who said this morning that the UK’s large current account deficit does not pose “an existential threat” to the recovery. GBP/USD opens this morning at 1.6980. There’s a bit of data on the way today that might have an impact but this might be limited due to the fact that the FOMC statement is fast approaching. `

We expect a range today in the GBP/USD rate of 1.6960 to 1.7000

Euro:

EUR/USD has traded a tight range over the last 24 hours, tighter than the range in GBP/USD anyway. It opens this morning at 1.3437. The start of the summer holidays in the Northern Hemisphere has no doubt accentuated the lacklustre nature of FX trading but the blank calendar yesterday didn’t help either. GBP/EUR has been equally narrow and trades this morning at 1.2640. Whilst the FOMC statement is the main market event, investors will also be keeping a close eye on rising geopolitical tensions.

We expect a range today in the GBP/EUR rate of 1.2610 to 1.2650

Aussie and Kiwi Dollars:

AUD/USD pushed higher yesterday as the US dollar weakened across the board but it has snapped lower again as European markets open this morning. According to an expert from Goldman Sachs, the RBA may be forced to cut interest rates to stave off yield demand for the currency, which seems to be driving it higher. It has seen AUD/USD slip back below the 94 US cent level to trade at .9395 currently. NZD/USD has also snapped lower from .8545 to .8505, having tripped through stop loss levels in early Europe. Fonterra, New Zealand’s biggest company and the world’s largest dairy exporter, cut its milk pay-out price overnight to NZD 6/kg, citing a fall in dairy prices and the high exchange rate as reasons. This news will likely continue to weigh on the kiwi throughout today. As a result GBP/NZD is pushing higher and opens at 1.9950.

We expect a range today in the GBP/AUD rate of 1.8000 to 1.8160

We expect a range today in the GBP/NZD rate of 1.9880 to 1.9990