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Investors brace for FOMC verdict
Forex
07/31/2019

Investors brace for FOMC verdict

Mixed Chinese PMI data coupled with fresh threats from Trump curbed investor optimism early on Wednesday.

Mixed Chinese PMI data coupled with fresh threats from Trump curbed investor optimism early on Wednesday. However, the greenback failed to attract safe-haven demand as traders turned cautious ahead of the crucial Federal Reserve decision. Trading ranges in the currency markets are tight, with the dollar is under a mild pressure against major counterparts.

As a 0.25% rate cut is fully priced in already, statements from the Fed Chairman Powell will be in focus and will set the tone to global markets. Should the remarks contain not as dovish undertones as expected, stocks may fall further while the dollar could gain across the board. The latest economic data from the US show there is no need in aggressive stimulus measures at this point. Besides, the USD may gain from the so-called strategy “sell the rumor, buy the fact”.

In this scenario, EURUSD may slip back to recent lows around the 1.11 handle and could even threaten the psychological support depending on Powell’s rhetoric. At that, the knee-jerk bearish reaction from the dollar could be expected when the Federal Reserve announces a rate cut. On the upside, the immediate resistance for the common currency comes around 1.1160.

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