Summary: Major stock markets, the U.S. dollar and oil prices tumbled during Asian and European market hours today as fears about a slowing global economy gripped investors ahead of much awaited US FOMC update scheduled to hike interest rate for fourth time this year and deliver the dot plot for 2019’s rate hike plans. Traders and investors have began to question the possibility of future rate hike by US Fed as many analysts and key market figures believe that global growth will continue to decline even further in 2019. According to investor survey conducted by Bank of America’s wealth management arm Merrill Lynch, Global economy is facing worst growth outlook in a decade. Meanwhile Chinese President Xi Jinping’s much awaited speech failed to help bulls gain momentum but his comments during speech where he reaffirmed China’s commitment in pursuit of “indigenous innovation” in “core technologies” boosted trade tensions between China and USA.
GBP/USD – The USD remained heavily offered in broad market which helped British Pound breach the 1.2700 handle. While Brexit headlines continue to pressure the pair, its influence on pair has reduced owing to PM May’s attempts to intentionally sabotage proceedings by delaying Brexit deal’s approval in UK Parliament. On the other hand, sharp sell of in USD ahead of US FOMC update tomorrow became the driving force of GBPUSD amid lack of high impact news during today’s Asian and European market hours.
USD/JPY – The pair extended its slide from previous trading session during Asian market hours but found support at 112 handle in late European market hours as dollar index fell to one week low influenced by broad based USD sell-off ahead of key event of the week – US FOMC interest rate decision update which will greatly affect medium to long term outlook of US Greenback. The pair saw slight rebound in early North American market hours supported by upbeat US macro data but continued sell-off activity surrounding USD in broad market limited the upside move.
DXY & EM Asian Currencies – Dollar Index (USD/DXY) which measures strength of greenback against six major global currencies is currently at 97 down by 0.13% after hitting one week low at 96.70 earlier in the day. At the same time most Asian currencies widely considered as emerging market currencies gained positive momentum on subdued USD ahead of FOMC update. Indonesian Rupiah was top gained up by 1.46% in late European market hours closely followed by Indian rupee which was trading up by 1.46% at the same time. Other major Asian currencies such as Korean won and Taiwan Dollar were also trading positive with over 0.20% around same time.
On the Lookout: As all first tier macro data updates from both sides of Atlantic have been released before European market session has come to close all eyes are now focused towards much awaited and much anticipated event of the week – US FOMC’s Rate Decision update. Investors expect US Fed to hike rate again tomorrow and the rate hike has already been priced in by majority of investors. The most awaited take away from tomorrow’s FOMC statement is forward guidance for Fed’s 2019 rate hike plans. While few believe that Fed will continue to hike rates but not as many times mentioned before while other believe that Fed will pause its rate hike plans for 2019 as macro data hints at slowdown in US economic growth. Traders will also get plenty of short term opportunities to book profit in European and American market hours as UK, Germany and Canadian markets will release their inflation data.
Trading Perspective: US and Asian market hours will see relatively subdued price action amid cautious investor sentiment ahead of US FOMC update but tomorrow’s European and American market hours will see plenty of action owing to multiple high impact macro economic data are scheduled to release in respective market hours.
EUR/USD – The EUR/USD pair has been trading positive across Asian and European market hours despite worse than expected German macro economic releases supported by increased sell off activity surrounding US greenback ahead of US FOMC update. The upward momentum currently in motion is expected to be short lived as euro area macro data hints at slowdown in economy. While macro data updates are expected to keep the pair highly volatile across the day, fed forward guidance will help gain a clear idea on medium to long term outlook for the pair.
GBP/USD – Brexit and UK politics related headlines will continue to be major driving force of the pair in long term outlook but short term outlook remains in favor of GBP bulls as broad based USD sell-off has influenced uptrend price action which is expected to continue until Fed rate decision and forward guidance data are released tomorrow. However the pair is expected to see high level of volatility both in London and US market hours owing to UK inflation data and US existing home sales data scheduled to release in respective time frames.
US Indices – U.S. stocks opened positive today boosted by technology shares, as investors wait for clues on the Federal Reserve’s path for future rate hikes. Positive investor sentiment in equity market is expected to hold steady across today’s US market hours supported by broad based USD sell-off and better than expected readings in US macro data released earlier today. All three major US indices – DAX 30, NASDAQ and S&P 500 are trading with more than 0.50% increase in value since market opened for the day and are expected to see solid bullish price action across US market hours.
