Forex today: US dollar marginally better-off on pre-Fed flushout and return of risk appetite

Forex today was marginally favorable to the dollar bulls ahead of the FOMC showdown this week.

USD ended the day +0.17% higher in the DXY (92.03 closing price), an index that is heavily weighted to the euro, and a currency that was a robust on the New York session, ending the day 0.09% up vs the greenback at 1.1950.

It does appear, however, that the market is gearing up for a possibly more hawkish event this time around in the FOMC meeting, despite the risks to the US economy that could well be acknowledged in the dot plot, such as N.Korea, recent weather, a government shutdown and lackluster inflation below targeted trend, with several measures of inflation well below 2%.

Elsewhere, the notable impact of the dollar, apart from Sterling (-0.68%), was through the higher yielders such as the antipodeans and Gold. The yen also took a beating and down to critical levels against the greenback on a technical basis. Gold ended the day -1.00% on a pre-Fed flush-out due to an overcrowded speculative long trade (Geopolitical risk). The yen was closing -0.63% with USD/JPY reaching 111.66 and above the daily cloud top at 111.61. GBP lost the bid and the 1.35 handle on a 'one-and-done' consensus in the market in respect to the BoE's recent hawkish rhetoric. AUD closed -0.47% and the Kiwi -0.32%. The CAD was sold off sharply on the back BOC’s Lane who expressed concerns over higher rates and the Loonie, ending the day -0.81% vs the greenback. WTI ended on the $50 handle having traded between 450.88 and $49.69.

Key events ahead in Asia

Analysts at Westpac noted the key events ahead in Asia:

"The RBA minutes will provide more information on the Board’s expectations but note that the meeting took place before the Q2 GDP release. In a post-meeting speech, Governor Lowe reiterated that balancing support for the labour market and risks to household debt remain front of mind. He also noted that this month’s meeting special discussion was on the Chinese economy."

Key notes from the US session

• Why this Fed meeting won’t be a non-event - ING
• Carney Speech: Any rate hikes are expected to be gradual and limited
• INSA Poll: Merkel's CDU/CSU bloc 36%, Social Democrats 22% - LiveSquawk
• Wall Street extends gains, closes at fresh record highs
• BoC's Lane: Rates are still quite low relative to what we think of as neutral level