- US Dollar holds its own as investors await Federal Reserve decision 31st July.
- Markets priced 30bp of easing at the 31 July meeting (from 40bp the previous day).
Forex on Friday was dictated by headlines around the Federal reserve expectations and geopolitics with respect to Iran, the UK and the US. The Dollar in the DXY was moving between 97.29 and 97.07 while 10-year yields rose from 2.04% to 2.06%. There were gains in WTI +37c at $56 on the news that Iranian guards seized the British Stena Impero tanker in the Strait of Hormuz Friday.
Looking around, U.S. stocks ended lower with the S&P500 ended lower 0.6%, also on the back of heightened tensions whereby major news hit the wires announcing that Iran had seized a British oil tanker. Then, the dollar and rates were trading higher when there were reports that dialled down the Fed NY President Williams' prior dovish comments.
"US 2yr treasury yields rose from 1.78% to 1.83%, while 10yr yields rose from 2.04% to 2.06%. Markets priced 30bp of easing at the 31 July meeting (from 40bp the previous day), driven by a clarification from the NY Fed as well as Bullard’s comments," analysts at Westpac explained, "Fed dove Bullard said an easing now would be insurance against a slowdown, but favours a 25bp cut (rather than 50bp), and doesn't expect the Fed will be entering into an easing cycle," analysts at Westpac explained.
Currency action
EUR/USD was under pressure falling from 1.1270 to 1.1204 as markets discounted the likelihood of a 50 basis point cut while GBP/USD fell from 1.2544 to a low of 1.2476 on better prospects of an orderly Brexit. In early Asia today, the news that the EU us looking to thrash out a new deal with the UK sent sterling on a rally, of which was sold back into. USD/JPY rose from 107.50 to 107.97 while the Aussie dropped from 0.7075 to 0.7038. The Kiwi was moving from 0.6790 to 0.6759.
Key notes from Wall Street:
Wall Street's benchmarks sag on dialled back Fed-cut expectations
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