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US Open Preview – Dollar hits fresh 3-week highs ahead of FOMC rate decision
June 13, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: FOMC rate decision takes center stage; Australian employment figures to move aussie
Wednesday’s economic calendar will feature PPI figures out of the US later in the day, though the conclusion of the two-day FOMC policy meeting will be the main headline.
At 1800 GMT in the US, the Federal Open Market Committee will announce its decision on interest rates, providing the reasoning behind it through its policy statement. Analysts are widely expecting the central bank to lift interest rates by 25bps to 2.0%, completing the second rate hike this year, and at the same time remaining globally at the forefront of the move to reduce monetary stimulus. Since the rate rise has been already fully priced in the markets, the focus will switch to the rate statement and the central bank’s fresh economic projections, while at 1830 GMT, all eyes will turn to the Fed chairman, Jerome Powell’s press conference. Should policymakers back a positive outlook – probably citing recent upbeat economic numbers – hinting the Fed could feel more comfortable to become more aggressive in the future, dollar bulls could push even further towards the 111 round level versus the yen. On the other hand, concerns over US’s trade relations with its closest allies are not unlikely to keep policymakers cautious over future economic trends. The famous dot plot, which displays where interest rates will head in the next few years according to projections made by Fed policymakers, will also gather a great amount of attention.
Before the FOMC meeting comes to an end, however, US PPI figures for the month of May will have the potential to move the dollar. Expectations are for the measure to rise from 2.6% y/y to 2.8%, while in the absence of volatile components such as food and energy, producer price growth is anticipated to stand flat at 2.3%.
In energy markets, the Energy Information Administration will deliver its weekly report on US oil inventories at 1430 GMT. Analysts believe that crude oil stocks have declined by 2.74 million barrels in the week ending June 8 after rising by 2.07mn in the preceding week. Gasoline and distillate stocks are projected to continue to rise but at a slower pace relative to the previous week.
In other data in focus, UK’s RICS house price index will come under review at 2300 GMT, while on Thursday at 0130 GMT, Australia will see the release of employment stats. Particularly, it would be interesting to see whether the unemployment rate has slipped back to 5.5% in May after inching up to 5.6% in April. The numbers are also forecast to show a slowdown in job creation, with analysts expecting the number of jobs to have risen by 18k compared to 22.6k seen previously. In case the data prove encouraging, aussie/dollar could extend today’s rebound from an almost two-week low of 0.7555 before the Chinese industrial production and retail sales due at 0200 GMT bring fresh volatility to the pair.
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