FOMC Mins In Focus This Week
Fed Rate Hike Expectations
Over a much quieter data schedule this week, focus for the US Dollar will be on the FOMC minutes due on Wednesday. Rate hike expectations have been shifting around since that hawkish June FOMC meeting with USD cooling as traders began questioning whether they had turned too aggressively hawkish on the Fed. Market pricing for a hike by year end soared to around 85% in response to the meeting as nine out of eighteen policymakers cited forecasts for at least one hike this year, up from zero in March. However, following the initial move higher in USD, the greenback started to correct lower through late June as plunging oil prices raised some questions around the inflation outlook upon which these hawkish forecasts were built.
Oil Prices & Inflation
Progress in US/Iran peace talks and the reopening of the Strait of Hormuz has seen oil prices drop more than 30% over the last month. In line with these declines, traders sense that inflation should start to moderate in coming months which could heavily alter the Fed’s game plan. Last week, a heavy downside miss on the NFP added to current USD weakness, pulling DXY lower as market pricing for a hike by year end cooled back to around 75%. However, pricing could rebound this week if the minutes come in on the hawkish side, helping USD recover.
Technical Views
DXY
The rally in DXY has stalled for now into the 101.91 level with price since turning lower. However, while the index holds above the 100.18 level, focus is on a continuation higher with 103.20 and the bull channel highs the next target for bulls. If we break lower, 99.15 and the channel lows will be next support to watch.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.