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The Fed has officially entered its particular blackout period and the market verdict just 9 days from the FOMC meeting is that a 25bp rate cut is likely to be the ‘insurance’ rate cut the Central Bank is seeking as a preventive measure. One that did not apply that adjective when giving his speech late Thursday last week was Fed’s NY President Williams, whose overly dovish comments on the US economy led to some USD vol fireworks, with the NY Fed later issuing a note clarifying that what Williams made sound like a 50bp rate cut message, should indeed be played down as the comments should, according to the subsequent note by the NY Fed, be taken only as ‘academics’ and not intended to relate to the Fed’s monetary policy decision on July 31st. One has got to agree that the Fed is suffering from a growing collection of miscommunications during Powell’s era. The USD bearish move pre-Willimas was essentially canceled and things went back where they were as if nothing had happened and the market sees 25bp rate as the most likely outcome now. A currency that finds no respite, as the equally-weighted index below indicates is the EUR, with the ECB mulling further easing and even a potential drop of its inflation goal mandate in light of how erroneous its model (and the rest of global CBs) has been at estimating inflationary pressures. The JPY has started the new week on the backfoot, as news that US-China may arrange in-person meetings with some ‘goodwill’ actions expected, most likely a key factor influencing the poor performance. The Kiwi and the Aussie, especially the former, remain on bullish trends as per the currency indices structures. Surprising to see the Kiwi so strong even if the RBNZ may opt to ease in August. Tells you how tough it is to find a good FX choice out there to diversify into (race to the bottom in easing cycles in full motion). The GBP has been able to find firmer buying interest for over a week as some glimpses of hopes emerge of work being done for the UK and the EU to revisit the Brexit deal once Boris Johnson is confirmed PM later this week (with all likelihood). I leave for last the CAD, with some clear cracks in its technicals, and the CHF, which shows the opposite, as the index broke out of a range.
* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
EUR/USD: Bulls’ Quick Round Trip Courtesy Of NY Fed
GBP/USD: Lack Of Demand/Supply Excess Results In Unclear Bias
USD/JPY: Bearish Structure Negated After NY Fed-Induced Recovery
AUD/USD: Uptrend Still In Place, Order Flow Bullish
USD/CAD: Playing Range Paying Dividends, Downside Clearest Value Opportunities