The USD was relatively unmoved after the Fed released minutes for the past meeting. The minutes showed that officials were committed to a ‘patient’ monetary policy, saying that rates will remain unchanged for a long period. They also showed that members were optimistic about the economy. Most of them said that earlier concerns about growth had abated. Their decision to leave rates unchanged was because of the low rate of inflation. The minutes said:
Members observed that a patient approach to determining future adjustments to the target range for the federal funds rate would likely remain appropriate for some time, especially in an environment of moderate economic growth and muted inflation pressures, even if global economic and financial conditions continued to improve
The Japanese yen weakened slightly earlier today after the country released the manufacturing PMI data. Data showed that the PMI declined to 49.6 this month, which is lower than the expected 50.5. In the previous month, the PMI was 50.2. This decline was attributed to declining export orders. The flash PMI data is published a week before the official PMI data. It came a day after the country released its trade data that showed a 6.4% drop in exports in April.
Today, traders will focus on the euro as Germany is expected to release its second reading of the Q1 GDP data. This is expected to show that the economy expanded by a YoY rate of 0.6% and a QoQ rate of 0.4%. The country will also release the PMI and other survey data. The manufacturing PMI for May is expected to increase to 44.8 from the previous 44.4. The services PMI is expected to decline to 55.5 from the previous 55.7. The ifo business climate index is expected to remain unchanged at 99.2. The EU will also release the minutes of the recent monetary policy meeting.
The EUR/USD pair declined to a low of 1.1150 in overnight trading. This is close to the weekly low of 1.1140. On the chart below, this price is between the middle and lower lines of the Bollinger Bands. The signal line of the MACD has continued to move lower while the price is below the 50 and 25-day moving averages. The pair will likely retest the previous low of 1.1140, where it will form a double bottom.
The GBP/USD pair continued to decline after reports that Theresa May could be gone ‘within days’. On the eight-hour chart, the price is at the lowest level since early January. The price is below the 50-day and 25-day moving averages. The RSI has remained below the oversold level of 30 while the Parabolic SAR remains above the current price. At the same time, the accumulation/distribution indicator has continued to drop. The pair will likely continue to drop to test the important support of 1.2550.
The USD/JPY pair rose slightly after weak data from Japan. It is now trading at 110.32, which is 20 pips higher than yesterday’s low. On the hourly chart, the pair has been moving higher for the past two weeks. This price is along the 50-day moving averages and between the Envelopes indicator. The pair is also above the important support shown below. It looks likely that the pair will continue moving higher to re-test the important resistance of 110.67.