Littlefish FX | Jul 30, 2015 06:06AM ET
The much awaited FOMC was largely a non-event. The statement was largely balanced. It noted improvements in labour market – “solid” job gains, declining unemployment, “diminished” labour market slack, but partially countered the hawkish take on labour market with inflation, which remains below the FOMC’s longer term objective of 2%, partly attributing this to falling energy prices. A strong majority of economists/dealers see a September move while futures market prices at only 36% chance sets up September meeting as a nail-biter. With FOMC out of the way, focus is now back of data. Focus shifts to US GDP data. The USD firmed post FOMC meeting as players took the balanced statement to suggest a September lift-off remains possible.
EUR/USD eased below 1.10-handle as post FOMC saw a resurgence of USD strength. Market views EUR as a funding currency play, the pattern where risk-on sees EUR lower while risk-off sees EUR higher continues to pan out. The ECB’s issuance of ELA funding to euro zone central banks lifted to its highest level since January 2013 at €139.7 billion while most of the ELA funding is to the central bank of Greece.
GBP reversed earlier gains, from 1.5690 to trade below 1.56 this morning amid broad USD strength. Medium term remains positive for UK outlooks amid ongoing economic recovery setting the stage for BoE to hike possibly as soon as 2Q 2016. That said near term GBP remains vulnerable to the downside, given that many positives have been priced in including some BoE members adopting a slight tinge of hawkish stance at recent speeches.
USD/JPY is back above the 124-handle following the resurgence in the dollar as the Fed fund rate hike lift-off remains on track. Japan’s industrial output increased 2% YoY in June, beat the market consensus of 1.3%
h3 Technical Commentary /h3EUR/USD Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
GBP/USD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
USD/JPY: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
EUR/JPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
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