(MENAFN- DailyFX) TALKING POINTS – EURUSD FORECAST, FOMC, FED MONETARY POLICYDraghi comments at symposium may be overshadowed byFOMC EURUSDwill likely be focusing on Powell comments and outlook If Fed is less dovish than expected, pair could test critical support
See our free guide to learn how touse economic news in your trading strategy !
EURUSD fell afterECB President MarioDraghi said future rate cuts may be in the cardsif the outlook does not improve, and even alluded to re-introducing QE if necessary. The symposium in Sintra, Portugal ends today and will include more commentary from the central bank President. However, the market impact of these comments may be overshadowed by the highly-anticipated FOMC rate decision.
While overnight index swaps are pricing in a meager 19 percent chance of a Fed rate cut, bets for a cuts by the July meeting jumped to a staggering 82 percent. If the Fed's rhetoric falls in line with its previously-articulated neutrality, the less-than-dovish surprise may catch markets off-guard and send theUS Dollarhigher at the expense of equities and USD-crosses.
A similar reaction occurred at the April 30-June 1 meeting where market participants found themselves dealing with a surprisingly less-dovish Fed. The fall in equities was a telling story. If investors see that prevailing economic conditions are not supportive of strong economic growth, cheap credit is the next best option to boost equities. If that possibility is undermined, why stay exposed to a vulnerable index in a slowing economy?
Conversely, if the Fed strikes dovish undertones, it could send theS & P 500index higher and potentially relieve some of therisks associated with a stronger US Dollar .However, if Chairman Jerome Powell reveals an unexpectedly pessimistic outlook for growth, it may induce risk aversion and push the Dollar higher as a premium is put on liquidity over yields.
CHART OF THE DAY: EURUSD MAY TOUCH CRITICAL SUPPORT IF FED NEUTRALITY IS MAINTAINED
FX RESOURCESJoin a free webinar andhave your trading questions answered Just getting started?See our beginners' guide for FX traders Having trouble with your strategy?Here's the #1 mistake that traders make
--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or@ZabelinDimitri on Twitter
MENAFN1906201900760000ID1098656620
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.