EIA weekly stockpile data from the US, Fed policy rate decision updates are the key focus of traders today.
Summary: Global equities are experiencing a dual-tone activity on key indices and risk assets over mixed cues from local and geopolitical proceedings. In the European market, major indices and key stocks propelled higher earlier in the day with a bullish opening led by gains in bank sector shares.
However, gains were capped, and by mid-late European session key assets edged slightly lower from intra-day highs albeit retaining bullish bias as caution started dominating the global market ahead of today’s Fed interest rate decision update. Among today’s losers, a sector-based perspective shows the Travel sector shares down by 2% in late European hours while Oil & Gas and Automobile sector shares are down by more than 1% to 1.5% at the same time frame.
Precious Metals: Amidst divided cues in the market, investors flocking to the safety of rare metals helped gold and silver trade on a positive note today. The strong cautious tone in the market helped propel spot gold above $1720 mark while silver is trading above $17.70 mark in spot market today.
Crude Oil: The price of crude oil futures in the international market remains within familiar price levels but shows a mixed reaction. Following a recent update from major OPEC players in the previous session, a build in the US API weekly inventory data weighed down oil bulls causing Brent futures to trade in red while WTI futures despite declining in Pacific-Asian market hours has recovered positive tone in anticipation of a decline in US EIA weekly stockpile data set to release later today.
DXY: The Dollar index remains unchanged compared to the previous session as firm caution ahead of today’s Fed interest rate decision update has prevented USD from making any major directional changes over the last 48 hours. As a result, the price of US Greenback against six major global rivals holds firm around the 96 handle in the index.
On The Lookout: The major focus of both local and global traders today is on US Fed monthly interest rate decision update and press conference. Given the Fed and US government’s excessive COVID-19 support packages worth several trillion USD’s which have been pumped into the US and international market so far and lockdown relaxation measures, hopes of economic recovery are very high at the moment.
This has solidified Fed members on their stance of no approach towards negative interest rates in the immediate and foreseeable future. The interest rate, however, is expected to remain unchanged during the ongoing meeting, which makes forward guidance from the meeting update the major focus of traders today. The cues from Fed update will act as short term directional bias given the fact that the global economy is suffering from the worst recession of the century at the moment.
Also, US EIA weekly crude oil stockpile update remains in focus and given the outcome of the API weekly stockpile data in the previous session and OPEC members announcing the cancellation of additional supply cuts aside from OPEC agreement starting this July, a build in the inventory readings would effectively end the ongoing rally and push the price of oil back into dovish territory over renewed concerns of glut outcome. However, a decline in-line with expectation will help crude oil price consolidate near weekly lows and await fresh cues for a trigger to move on to the next leg of the positive price rally.
On the release front, the US calendar will also see Core CPI data aside from Fed meeting update and EIA weekly stockpile info while the Canadian calendar remains silent today.
Trading Perspective: Wall Street is set to open on a positive note today, US futures trading in the international market retained positive bias albeit trading near flat in Asian and European market hours over caution ahead of Fed meeting. US banks are preparing to re-open their branches as part of the US Government’s post-COVID-19 lockdown economic re-opening activities. Given today’s Fed interest rate decision which comes at such a crucial time, interest rates are likely to be unchanged but traders will focus on news of further stimulus measures or signs for how long the current level of the relaxed market scenario and Fed aid will last and this will greatly help provide a directional bias affecting key risk assets in short-mid term market activity.
EUR/USD: The pair is trading on a positive note and is back above 1.13 handle by taking advantage of USD’s muted momentum ahead of the Fed policy decision update. While USD remains firm, a lack of attempt from USD bulls to build rally helped EURO recovery from previous session loss but prevented the pair from conquering the 1.1400 handle for now. Traders await US macro data updates and Fed policy rate decisions for short term profit opportunities and directional cues.
GBP/USD: The pair is trading positive in the international market with British Pound testing 1.28 handle as hopes for economic recovery ahead of UK PM Boris Johnson’s announcement supports GBP bulls at the moment. However, the pair is mostly holding firm in 1.27 handle as caution ahead of today’s Fed policy decision update capped further gains. Traders now await an update from PM Johnson on what businesses will re-open in UK and US Fed update and macro data for short term profit opportunities and directional cues.
USD/CAD: The pair is trading flat as neither side lacks strength required to make a breakout rally. The mixed price action of crude oil and focus on US EIA weekly stockpile data update release later in the day pressures CAD given renewed glut scenario concerns. Firm USD failed to build a rally on caution ahead of Fed policy decision update pressuring USD bulls. The pair remains range-bound within range of 1.3360-1.3430 while awaiting macro data updates and US Fed policy rate decisions for directional cues.
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