A typical pre-Federal Reserve (Fed) event caution trading dominated Wednesday’s Asian session, with Asian stocks, US equity futures and Treasury yields on the back foot, highlighting the tepid risk sentiment. Meanwhile, the greenback attempted a bounce across the board following the overnight drop, as Gold prices treaded water around 1500 levels.
Amongst the G10 currencies, Antipodeans suffered the most, with AUD/USD back below the 0.6850 barrier while the Kiwi shed about 30-pips to test 0.6330 support area. The USD/JPY pair consolidated its recovery in a tight range around 108.20 region, despite upbeat Japanese trade data and escalating South Korea-Japan trade row. Meanwhile, the Canadian dollar traded weaker vs. the buck, as oil prices reversed a part of the 6% drop seen on Tuesday after Saudi said the Kingdom has managed to restore oil supplies pre-weekend attack levels.
Heading into Europe, the EUR/USD pair remains on the backfoot below the 1.11 handle while the Cable keeps losses below the 1.25 handle, both awaiting fresh impetus for the next push higher.
Main Topics in Asia
US Pres. Trump: China trade deal could come before US election, or not
WH’s Kudlow: Economy has potential to grow 3% or better
New Zealand Q2 Balance of Payments: Pretty average – ANZ
Japan's exports fall for ninth month in a row
PBOC sets Yuan reference rate at 7.0728
DoubleLine's Gundlach: 'Less positive' on gold as a buying entry
French Pres. Macron calls Saudi crown prince on Aramco attacks - SPA
China’s NDRC: Faces certain pressure in stabilizing employment due to China-US trade frictions
Asian stocks report gains ahead of the Fed rate decision
UK firms would incur tariff costs after no-deal Brexit – CIPS survey
S. Korea downgrades Japan trade status, Japan says the move is “regrettable”
Key Focus Ahead
Ahead of the key event risk for Wednesday, the FOMC monetary policy decision (due at 1800 GMT) and Fed Chair Powell’s press conference, traders will closely watch the inflation figures from the UK, Eurozone and Canada. The UK Consumer Price Index (CPI) will be reported at 0830 GMT, followed by the Eurozone CPI release at 0900 GMT alongside the bloc’s Construction Output numbers.
Meanwhile, the Canadian CPI figures will drop in at 1230 GMT, parallelly to the US Housing Starts and Building Permits data. Later at 1430 GMT, oil traders will focus on the Saudi Defence Ministry’s press conference and the US Energy Information Administration (EIA) weekly Crude Stocks data. Saudi Defence Ministry is likely to reveal the evidence of Iran’s hand in the Saud attacks.
Next of note remains the FOMC rate decision, with a 25bps rate cut already factored-in and therefore, all eyes will remain on the Fed’s projections, dot-plot chart and Powell’s speech for the Fed’s future monetary policy path and its impact on dollar trades.
EUR/USD stays under pressure as traders await Fed rate decision
Despite shooting up on Tuesday, the EUR/USD pair fails to hold on to recovery gains as it trades near 1.1070 ahead of Wednesday’s European session. All eyes on the US Federal Reserve’s monetary policy announcement due at 18:00 GMT.
Cable charts bullish continuation pattern ahead of the Fed
GBP/USD created a bullish outside bar candlestick on Tuesday, signaling a continuation of the recent rally. The outlook would turn bearish if the pair closes below Tuesday's low of 1.2392, in the face of a less dovish Fed outcome.
UK inflation preview: How August's pound weakness may boost GBP/USD now – trading opportunities
Economists expect UK inflation to have slowed down in August. The weakness of the pound may trigger a second consecutive surprise. GBP/USD may enjoy a temporary rise, with focus returning to Brexit.
Saudis to report the evidence of Iran's involvement in the Aramco attacks - (Presser Wed,1430 GMT)
Suggestions are that there will be a Saudi Defence Ministry presser later on Wednesday that will reveal Iran's involvement in the weekend attacks on Aramco facilities.
Federal Reserve Preview September 17-18 FOMC: Even Odds
Expectations for a second 25 basis point cut have declined sharply. Credit market reflect uncertainty over economy, international politics. FOMC divided on rate cut in July, 7-2.
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