Today’s FOMC Can Make or Break the EUR/USD

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1. Today’s FOMC Can Make or Break the EUR/USD

The USD halted its move upwards ahead of tonight’s FOMC meeting while the EUR is recovering slightly but remains stuck below key resistance levels. The EUR/USD was rather muted at 1.1150 as of 7:55 GMT this morning and this was due to the fact that the greenback held on to most of its recent gains so tonight’s FOMC meeting will also determine the fate of the EUR’s next move. The U.S. central bank is widely expected to cut interest rates for the first time since the financial crisis more than a decade ago. But with these expectations already priced in, a more hawkish stance by the Fed today could help give the dollar an even stronger boost.  Investors will also focus on the EU GDP today, due at 9:00 GMT and forecasts point to another weak reading so we could see this weakness reflected on the EUR/USD.* 

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2. The Australian Dollar Recovers

The AUD recovered well overnight after recording steep losses on the days before. The AUD recovered after Australian consumer price inflation rose in the second quarter, raising questions over the likelihood of further interest rate cuts by the central bank in the near-term; a slightly weaker USD also helped support the AUD/USD.**


3. Powell’s Dilemma 

What is more, Federal Reserve Chair Jerome Powell has been pressured by President Donald Trump to slash rates literally since he took the wheel of the Federal Open Market Committee. On the one hand, a Fed rate cut could give Trump another weapon in the trade war with China as a cheaper dollar will allow the U.S. to keep their exports competitively priced and boost the appeal of its domestic products. Hefty tariffs on Chinese products will make them far less appealing to the average U.S. consumer. On the other hand, Powell is pressured internally by his own committee since a number of members disagree with imposing drastic cuts so a more dovish stance by Powell could widen the growing rift within the central bank itself. So unless Powell remains highly cryptic and neutral today, we would expect major volatility for the USD, as market participants dissect his every word for clues on what future monetary policy.**


4. Apple Reports Strong Q3

Apple reported its Q3 2019 earnings to investors yesterday, revealing that overall revenue was up 1% over the same quarter last year, reaching $53.8 billion. Apple CEO Tim Cook characteristically stated that this was “a blowout quarter” for wearables, despite a slight dip in iPhone sales. Apple also reported higher than expected estimates for Q4, which has helped bring stock markets a bit up after trading lower on the day yesterday. Today, investors will focus on a fresh set of earnings including Credit Suisse, BBVA, General Electric, CME Group, BNP Paribas, Air France KLM, Lloyds Banking and BAE Systems.***


5. Oil Prices Rise, Gold Recovers 

Oil prices rose for a fifth this morning, buoyed by a bigger-than-expected drop in U.S. inventories yesterday, today’s crude oil stocks at 14:30 GMT will give investors further input. Gold prices meanwhile also inched slightly higher on Wednesday as the dollar took a breather from its recent rally.****


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*Financial Times Jul 31, 2019 03:07 AM ET
**Reuters Jul 31, 2019 3:53 AM ET
***CNBC Jul 31, 2019 2:48 AM ET
****Investing Jul 31, 2019 05:20 AM ET

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