FOMC Minutes Urge Patience On Rate Hikes

The Federal Reserve released the monetary policy meeting minutes late yesterday. The minutes revealed that policymakers were committed to keeping interest rates steady over the next few months.

Members raised their expectations on economic growth and unemployment while anticipating that inflation will steady near the 2% inflation target rate. The USD strengthened into Wednesday’s close.

 

Euro Stays Subdued

The common currency posted modest declines losing 0.09% on the day. The soft declines came despite the greenback posting strong gains on the day. Economic data from the eurozone was sparse. But, looking ahead, the flash PMI reports are due out later today including the start of the EU elections.

EURUSD Likely to Settle Lower on the Day

The common currency could continue extending the declines as it approaches the support area near 1.1140. We expect to see some consolidation taking place at this level. The EURUSD currency pair will maintain its sideways range within 1.1182 and 1.1140 levels in the near term. However, there is a risk of a break down below 1.1140 which could push the common currency to break down to fresh lows.

 

Sterling Slips to Fresh 4-Month Lows

The UK’s inflation report showed that consumer prices edged slightly higher in April. Headline inflation rose 2.1% on the year advancing from 1.9% previously. This was slightly below the estimates of a 2.2% increase. Core inflation also grew at a slower pace of 1.8%, missing estimates of a 1.9% increase. Brexit continues to dominate the GBP flows. The currency fell after the UK’s House of Commons leader resigned on PM May’s approach to Brexit.

GBPUSD to Extend Declines

The currency pair lost 0.35% on the day and the bearish momentum indicates further declines. The GBPUSD could fall to 1.2606 level which would test the close from early January this year. If price does not stabilize at this level, the currency pair could be facing further losses. However, there is scope for a rebound in price given that the GBPUSD is down for the third consecutive week.

 

Gold Muted to Fed Minutes

Gold prices did not react much to the release of the FOMC meeting minutes. This comes amid the market sentiment trading mixed. The threat of the trade wars continues to remain a concern among investors. This has kept a lid on the declines in gold prices which trade near the recent lows of 1270.

Can Gold Rebound in the Near Term?

Price action is rather subdued near the 200-day moving average. With the support level established at 1270, gold prices could remain biased to the upside. The immediate resistance level at 1285 remains key in the short term. Unless gold breaks down below the 1270 level, we expect price to remain muted at the current levels. Watch for any potential reversal in gold that could see price retesting the 1285 level of resistance.