The US Dollar retreated at the start of the trading week amid pre-positioning ahead of the much-anticipated FOMC monetary policy announcement.
Talking Points:
US Dollar Drops Amid Pre-Positioning Before FOMC Policy Announcement
Euro Unlikely to Find Lasting Direction Cues in German IFO Survey Data
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The US Dollar underperformed in overnight trade as front-end yields declined, hinting weakness may reflect pre-positioning ahead of this week’s much-anticipated FOMC policy meeting. Traders may be paring back exposure in favor of a more neutral posture until after event risk passes having rebuilt bets on a 2015 rate hike over the past two weeks (as reflected in the December Fed Funds futures contract).
July’s German IFO survey of business confidence headlines the economic calendar in European trading hours. The headline Business Climate gauge is expected to edge narrowly lower, marking the third consecutive month of deterioration. The release seems unlikely to have a significant impact on the Euro however considering its limited implications for near-term ECB monetary policy, which appears to be on auto-pilot for the time being.
Later in the day, US Durable Goods orders data enters the spotlight. An increase of 3.2 percent is being penciled in for June, which would amount to the strongest uptick in three months. US economic news-flow has increasingly outperformed relative to consensus forecasts over recent weeks, opening the door for an upside surprise. Follow-through may prove constrained however, with traders unwilling to firmly commit to a directional bias until after the FOMC announcement is behind them.
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