US Dollar May Rise as Fed Leaves 2016 Rates Outlook Unchanged
- Yen declines, Pound corrects higher as Asian shares digest “Brexit” fears
- US Dollar may rise if Fed economic and rates forecasts hold unchanged
- Status-quo FOMC posture may trigger risk aversion, sink commodity FX
The Yen underperformed in overnight trade as Asian stocks corrected higher following four consecutive days of losses that brought prices to a three-week low. The cautiously risk-on mood undermined demand for the anti-risk Japanese unit while boosting the British Pound, underscoring the centrality of “Brexit” worries in driving the slump in sentiment since late last week.
Looking ahead, all eyes are on the Federal Reserve monetary policy announcement. The central bank will unveil an updated set of economic and interest-rate forecasts in addition to its regular post-meeting statement and Chair Janet Yellen will hold a press conference. Priced-in expectations implied in Fed Funds futures contracts envision a mere 2 percent probability of an interest rate hike.
Traders’ Fed policy outlook took a sharp dovish turn after May’s dismal payrolls figures and markets will look to the central bank for validation. For their part, central bank officials have been somewhat dismissive, warning that it would be unwise to over-extrapolate from a single data point subject to multiple revisions in the coming months.
This means that investors could be surprised to find the plan for two rate hikes this year as well as baseline forecasts for growth, employment and inflation remain broadly unchanged. Such a result would appear hawkish relative current priced-in bets and seems likely to push the US Dollar higher. It may likewise stoke renewed risk aversion, applying outsized pressure on the Australian, Canadian and New Zealand Dollars.
|21:00||NZD||REINZ House Sales (YoY) (MAY)||13.6%||-||18.4%|
|22:45||NZD||BoP Current Account Balance (1Q)||1.306b||0.960b||-2.894b|
|22:45||NZD||Current Account GDP Ratio YTD (1Q)||-3.0%||-3.0%||-3.2%|
|23:30||AUD||Weekly Consumer Confidence Index (JUN 12)||116.4||-||116.8|
|00:30||AUD||Westpac Consumer Conf Index (JUN)||102.2||-||103.2|
|00:30||AUD||Westpac Consumer Conf SA (MoM) (JUN)||-1.0%||-||8.5%|
|03:00||NZD||Non Resident Bond Holdings (MAY)||68.5%||-||66.5%|
|06:00||JPY||Machine Tool Orders (YoY) (MAY F)||-||-25.0%|
|08:30||GBP||Claimant Count Rate (MAY)||2.1%||2.1%||Medium|
|08:30||GBP||Jobless Claims Change (MAY)||0.0k||-2.4k||Medium|
|08:30||GBP||Average Weekly Earnings (3M/YoY) (APR)||1.7%||2.0%||Low|
|08:30||GBP||Weekly Earnings ex Bonus (3M/YoY) (APR)||2.0%||2.1%||Low|
|08:30||GBP||ILO Unemployment Rate (3Mths) (APR)||5.1%||5.1%||Medium|
|08:30||GBP||Employment Change (3M/3M) (APR)||60k||44k||Low|
|09:00||EUR||Eurozone Trade Balance SA (APR)||21.5b||22.3b||Low|
|09:00||EUR||Eurozone Trade Balance NSA (APR)||26.0b||28.6b||Low|
|CCY||Supp 3||Supp 2||Supp 1||Pivot Point||Res 1||Res 2||Res 3|
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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