The US dollar is mixed against major pairs ahead of the end Fed’s FOMC meeting. The Fed is set to deliver the first interest rate cut in 10 years, lowering the benchmark rate by 25 basis points. A deeper cut was slowly priced out as economic fundamentals remains strong.

The spotlight will be on Fed Chair Powell and the answers he gives members of the financial press. Last week ECB President Mario Draghi was thought to not be dovish enough, and the euro rose despite the central bank signalling a rate cut deeper into negative territory.

Central banks around the globe are ready to keep rates lower for longer, and the Fed will lead the charge despite ending its QE program and hiking four times in 2019. Global growth has stalled, and central banks will look at their depleted monetary policy arsenal to gain traction.

EUR/USD Markets Await Fed Decision and Further Guidance

The euro gained 0.11 percent versus the dollar on Tuesday. The single currency is trading at 1.1157 expecting a 25 basis points cut from the Fed. The language in the rate statement and the words from Fed Chief Powell will be the ones guiding the market as the central bank prepares to lower its benchmark rate on Wednesday. The ECB signalled an upcoming rate cut in September, but once again sent mixed signals during the press conference. Mario Draghi will step down in October with Christine Lagarde set to take over the central bank with a lot to do, and little left in monetary policy ammo to do so.

The Fed is the best positioned major central bank as it is not facing a dire slowdown and it has room to adjust its benchmark rate if needed. The pressure for the US central bank has mostly come from internal factors as the White House has campaigned for lower rates and the biggest headwind for the US economy has been the US-China trade war.

The US trade team is in China and while optimism remains muted the fact that talks are happening is good news for growth not only in America but at a global scale, a negative outcome of the trade talks could lead to more growth downgrades around the world.

OIL

Oil prices rose on Tuesday in anticipation of further dollar softness and another drop in US crude inventories. The U.S. Federal Reserve started its July Federal Open Market Committee (FOMC) meeting and will wrap it up tomorrow at 2pm EDT with the release of its rate statement and the press conference by Fed Chair Jerome Powell. The market is fully pricing in a 25 basis points interest rate cut, but t the answers from Powell will weigh more on future dollar pricing as a less dovish outlook could lead to a dollar rebound.

West Texas Intermediate gained 2.06 percent and Brent 1.55 percent as a weaker dollar ahead of the Fed and trade optimism putting less downward pressure on crude. Comments from the White House have hinted that a deal won’t be announced, but the restart of negotiations could eventually lead to a positive outcome.

The tension in the Middle East continues to rise as the US wants to form an alliance with Germany, France and the UK to safeguard the passage of oil tankers through the Strait of Hormuz.

GOLD

Gold rose 1.65 percent on Tuesday ahead of the end of the Fed’s FOMC meeting on Wednesday. The heavily anticipated interest rate cut by the Fed is already priced into the value of gold, but there is still plenty of speculation on how dovish Fed Chair Powell will be during his press conference. Economic indicators in the US have remained solid, although there are small signs of the economy losing momentum but given the global growth forecasts it could lead to the Fed having to do go back to a patient stance despite the pressure from the White House.

Gold will look for direction in the tone of the Fed Chief’s rhetoric. More dovish could lead to a weaker dollar and a higher price for gold, but neutral to hawkish comments on the economy could lead to a rebound in the dollar putting downward pressure on the metal.

Foreign exchange transactions carry a high degree of risk and any transaction involving currencies is exposed to, among other things, changes in a country's political condition, economic climate, acts of nature - all of which may substantially affect the price or availability of a given currency. Speculative trading in the foreign exchange market is a challenging prospect with above average risk. You must therefore carefully consider your investment objectives, level of experience and appetite for such risk prior to entering this market. Most importantly, do not invest money that you are not in a position to lose. In addition, trading on a margin basis means that any market movement will have a proportionate effect on your deposited funds. This can work for you as well as against you. The possibility exists that you could sustain a total loss of initial margin funds. OANDA's trading system is designed to automatically liquidate all open positions if your margin deposit is in jeopardy so that you cannot lose more than the funds you have on deposit in your account. It is encouraged that you employ such risk-reducing strategies as 'stop-loss' or 'stop-limit' orders, but you should be aware that market conditions may make it impossible to close out your order at the level specified. There are also risks associated with utilizing an Internet-based trade execution software application including, but not limited to, the failure of hardware and software. OANDA maintains back up systems and contingency plans to minimize the possibility of system failure. Your Margin Account with OANDA is not insured under any state or federal insurance program, or by any other entity. In the event OANDA should become insolvent or file for protection under the bankruptcy laws, it is possible that you would lose the entire amount in your Margin Account. Please be sure to read our complete Risk Disclosure Statement and contact us if you have any questions or concerns.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

AUD/USD renews two-month lows near 0.7050

AUD/USD refreshes two-month lows near 0.7050, having stalled its bounce around 0.7075 region. The US dollar appears to have regained poise amid tepid market mood. The focus is now on whether the US dollar gives back some ground ahead of US data, Powell Day 3. 

AUD/USD News

Gold's potential short-term reprieve if USD pulls back

Gold prices have deteriorated in the US dollar's relentless comeback as investors move away from stocks. The price of the dollar is correlated to gold, so it stands to reason that if the dollar is about to tail off its gains, then gold should find reprieve.

Gold News

USD/JPY: This could be the bulls's last dance in the 105, eyes on 103.50s

USD/JPY is stalling at market structure and bears and looking for opportunity to the downside. Bulls might have some upside to go yet, but the air will be getting thinner in those heights.

USD/JPY News

WTI: Oil sellers face rejection below $39.30 for third straight day

WTI fades the drop to sub-$39.30 levels for the third consecutive day. The repeated bear failure may entice buyers and yield a bounce. However, Sept. 18 high remains a level to beat for the bulls.

Oil News

Euro outlook: Is 1.15 next?

Investors continued to sell euros on Wednesday, driving the currency to its weakest level since July. Europe’s greatest fear is materializing with the number of coronavirus cases exceeding 5 million. As we indicated at the start of the week, stricter restrictions are on their way.

Read more

Forex Majors

Cryptocurrencies

Signatures