FOMC in focus

Frank Walbaum FX Strategies.Asia

lmportant news this week:

Wed, 17th, 20:00 CET AU FOMC Interest Rate Decision.
Thu, 18th, 08:00 CET UK Claimant Count Change.
Thu, 18th 09:30 CET CH SNB Rate Decision.
Thu, 18th, 13:00 CET UK BoE Interest Rate Decision.

USD and Fed expectations remain in focus

The US dollar remains the key driver for markets as investors assess the outlook for inflation, interest rates, and economic growth. Recent comments from Fed Chair Kevin Warsh have been interpreted as slightly more dovish by some market participants, particularly as falling energy prices could eventually feed through into lower inflation readings. While many of the objectives discussed in recent US negotiations have not yet been fully achieved, markets continue to price in the possibility of improving economic conditions and a less restrictive monetary environment over time.

Oil remains an important market to watch. Prices continue to drift lower, supporting the view that inflation pressures could ease further in coming months. If oil remains under pressure, this may strengthen expectations that the Fed is approaching the end of its tightening cycle and could eventually consider rate cuts. For now, however, most of these expectations appear largely priced into markets. Equities could benefit if dovish expectations continue to build, although traders remain cautious ahead of further economic data and central bank communication.

Market talk

Market sentiment is cautiously constructive. The decline in oil prices continues to support the risk-on narrative, while weaker inflation expectations help reduce pressure on central banks. Precious metals remain firm, benefiting from the combination of lower oil prices and uncertainty surrounding future monetary policy. The Japanese Yen has strengthened across the board for now, suggesting some defensive positioning and growing confidence in the Bank of Japan's policy normalization. Overall, markets remain in a waiting pattern, with investors looking for fresh catalysts to determine whether the current risk-on environment can extend further into the coming weeks.

Tendencies in the markets

Equities positive, USD stronger, BTC positive, oil weaker, Silver positive, Gold positive.

Author

Frank Walbaum

FX Strategies.Asia

Frank has been working in the TV business for several years. Acquiring his skills in Germany’s biggest broadcasting station, he then chose to work and live in Asia, which was in 2007.

GBP/USD bounces off lows, back above 1.3200

After bottoming out near 1.3160, GBP/USD manages to regain a bit of shine and reclaim the 1.3200 mark and beyond at the end of the week. Stronger-than-expected UK Retail Sales data seem to be helping the British Pound limit its losses, while the chaotic UK political environment keeps the bulls at bay for now.

EUR/USD looks consolidative around 1.1460

EUR/USD stages a modest rebound after slipping to a three-month low below 1.1420 at the end of the week. That said, the pair now looks to consolidate humble gains just above 1.1460 despite growing uncertainty surrounding the next round of US-Iran negotiations, which keeps the US Dollar’s downside contained.

Gold slips back to six-day lows, targets $4,100

Gold retreats for the third consecutive day on Friday, eroding gains seen in the first half of the week and approaching the key $4,100 mark per troy ounce. Indeed, the precious metal continues to face headwinds from the Fed's hawkish stance and renewed uncertainty surrounding the next round of US-Iran negotiations.

Breaking: Iran closes the Strait of Hormuz amid ceasefire deal violation

Iran says it is closing the Strait of Hormuz after accusing the United States (US) and Israel of violating the ceasefire. According to Iran, the decision came over the continued Israeli strikes in Lebanon. The Iranian Revolutionary Guard Corps Navy issued a warning to all vessels: "Do not approach the Strait of Hormuz; otherwise, your security will be jeopardized."

The Iran war didn't break the US economy, but what happens next?

Nearly four months after the start of the Iran war, the US economy remains remarkably resilient. While the conflict initially triggered a severe disruption to global energy markets and a sharp rise in Oil prices, recent diplomatic progress between Washington and Tehran has eased concerns about a prolonged supply shock.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.