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Talking Points:

  • US Dollar Uptrend Hangs in the Balance as Fed Policy Announcement Looms
  • British Pound May Not See Follow-Through on June BOE Minutes Pre-FOMC
  • Yen Edges Downward on Ebbing Haven Demand as Nikkei 225 Gains in Asia

The spotlight is on the Federal Reserve as the rate-setting FOMC committee delivers the outcome of its two-day policy meeting. This outing takes on particular significance in that it will be accompanied by the release of an updated set of policymakers’ economic forecasts as well as a press conference from Fed Chair Janet Yellen. As we’ve discussed previously, the fate of the Fed’s effort to “taper” QE asset purchases with an eye to end the program this year – paving the way for interest rate hikes – has been a formative catalyst for the markets this year.

US economic news-flow has broadly improved relative to consensus forecasts since early April but a recent string of disappointing releases have rekindled doubts about the strength of the recovery following dismal performance in the first quarter. Indeed, the US Dollar came under renewed selling pressure in June as traders scaled back bets on swift Fed policy normalization, putting the greenback’s multi-year uptrend in jeopardy.

For their part, FOMC officials have adamantly maintained that the first quarter was a hiccup in an otherwise supportive environment. If that sentiment is reflected in an upgraded set of economic forecasts and/or an upbeat Yellen presser, this dynamic may be overturned, sending the US unit broadly higher against its leading counterparts. On the other hand, a cautious tone that keeps alive the possibility that the central bank may yet rethink stimulus withdrawal stands to yield the opposite effect.

Minutes from June’s Bank of England policy meeting headline the calendar in European hours. Recent comments from Bank officials have signaled that a divergence of views on the timing of the first post-crisis interest rate hike is beginning to emerge, which Governor Carney suggested may occur sooner than markets expected. Confirmation of such hawkish leanings in the Minutes document is likely to offer a boost to the British Pound, while more reserved rhetoric may apply downward pressure. In any case, follow-through will probably prove limited before the FOMC announcement crosses the wires. Technical positioning hints GBPUSD may be topping.

The Japanese Yen underperformed in otherwise quiet overnight trade, sliding as much as 0.14 percent on average against the G10 FX majors. The move tracked an advance in Japan’s benchmark Nikkei 225 stock index, hinting ebbing haven demand for the safety-linked currency was the culprit behind the decline.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Current Account Balance (1Q)

1.407B

1.400B

-1.512B

22:45

NZD

Current Account Deficit/GDP Ratio (YTD) (1Q)

-2.8%

-2.8%

-3.4%

23:50

JPY

Merchandise Trade Balance Total (¥) (MAY)

-909.0B

-1189.3B

-811.7B

23:50

JPY

Adj. Merchandise Trade Balance (¥) (MAY)

-862.2B

-1030.5B

-880.5B

23:50

JPY

Merchandise Trade Imports (YoY) (MAY)

-3.6%

1.8%

3.4%

23:50

JPY

Merchandise Trade Exports (YoY) (MAY)

-2.7%

-1.3%

5.1%

23:50

JPY

Bank of Japan May Meeting Minutes

-

-

-

0:00

AUD

Conference Board Leading Index (APR)

-0.1%

-

0.0%

0:30

AUD

Westpac Leading Index (MoM) (MAY)

0.1%

-

-0.5%

1:45

CNY

MNI Business Indicator (JUN)

55.0

-

53.7

5:30

JPY

Nationwide Dept Store Sales (YoY) (MAY)

-4.2%

-12.0%

5:30

JPY

Tokyo Dept Store Sales (YoY) (MAY)

-4.3%

-10.8%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:30

GBP

Bank of England June Meeting Minutes

-

-

High

9:00

EUR

Eurozone Construction Output (MoM) (APR)

-

-0.6%

Low

9:00

EUR

Eurozone Construction Output (YoY) (APR)

-

5.2%

Low

9:00

CHF

ZEW Survey (Expectations) (JUN)

-

7.4

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3455

1.3506

1.3526

1.3557

1.3577

1.3608

1.3659

GBP/USD

1.6862

1.6913

1.6939

1.6964

1.6990

1.7015

1.7066

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