Forex Today: Dollar licking its wounds, gold gives ground, ahead of the all-important Fed decision

Here is what you need to know on Wednesday, July 29:

Markets have somewhat calmed – potentially before next storm – after the massive dollar sell-off and gold's surge earlier in the week as tensions mount ahead of the Federal Reserve's decision. US coronavirus figures, slow-moving fiscal stimulus negotiations, and vaccine hopes are all in the mix.

Gold is stabilizing around $1,950, midway between the new high of #1,980 and the 2011 peak of around $1,921.50. Bank of American foresees $3,000 within 18 months. JP Morgan is bullish on XAU/USD in the short term, and Goldman Sachs sees the precious metal rising to $2,300. Silver, which has also seen a massive rally as well, is set to hit $30 within a year, according to GS.

The US dollar is licking its wounds after a sell-off early this week and stocks are edging lower as speculation around the Federal Reserve's decision is rising. The world's most powerful central bank is set to leave its policy unchanged after its massive monetary stimulus early in the year and as it has already signaled no rate hikes at least until 2022. 

Jerome Powell, Chairman of the Federal Reserve, will likely be asked about its recent extension of lending programs, the potential for controlling the yield curve, and how lawmakers can play their part. Concerns about worrying signs related to the US economy could further weigh on the greenback.

See:

• Fed Preview: Warming up to controlling the yield curve, nudging lawmakers, keeping markets happy
• US FOMC July Preview: The advent of yield curve control?

US fiscal stimulus: Senate Republicans are unable to fully agree on the plan presented earlier this week by their own party days ahead of the expiry of federal unemployment benefits. The program includes slashing this support by a third, while Democrats prefer only a minor cut. Both sides are also at odds over liability issues, blame each other, and acknowledge talks are only at the beginning. 

Without additional help, the world's largest economy could suffer, as personal expenditure would fall. The Conference Board's Consumer Confidence gauge dropped sharply to 92.6 points in July. Pending Home Sales for June are due out later in the day.

US coronavirus cases have stabilized around 60,000 per day while the seven-day rolling average of deaths continues climbing, topping 1,100. 

President Donald Trump has repeated his optimism that a vaccine is coming shortly, adding to hopes expressed by top epidemiologist Anthony Fauci. Several Phase 3 trials are underway, with hopes of completing them in the late autumn. Russia will reportedly approve a vaccine within two weeks, in what is described as a "Sputnik moment" despite concerns about hasty development. 

EUR/USD is holding up above 1.17 benefiting from the upbeat German IFO Business Climate and the agreement on the EU fund, while concerns about rising COVID-19 cases rise.

GBP/USD is above 1.29 as the UK extends its reopening. Brexit talks are going nowhere fast.

AUD/USD is trading around 0.7150 after downbeat Australian inflation figures. Both the headline and core Consumer Price Index were negative in the second quarter. Australian states have tightened travel restrictions as coronavirus infections remain elevated. 

USD/JPY is hovering around the 105 level, above the trough of 104.50, which is the lowest since March. Tokyo's COVID-19 cases remain elevated. 

Cryptocurrencies have also been consolidating their gains after the surge. Bitcoin is trading around $11,000, Ethereeum above $300, and XRP around $0.24.

More Hot Summer In Markets: Gold, silver, euro, and dollar volatility explained