Wed, Feb 01, 2023 @ 09:51 GMT
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Dollar Softens Ahead Of FOMC Meeting, Saudi Arabia Helps Push Oil Prices Up

During the Asian session, forex markets didn’t have much to react to in the absence of important economic releases. Hence, yesterday’s events along with the upcoming two-day US Federal Open Market Committee meeting that starts today have been commanding most of the moves today.

The US dollar weakened against most currencies as investors await the news from the two-day FOMC meeting on interest rate policy that starts later today. Many investors expect the Federal Reserve to announce that it will begin reducing its balance sheet at its September meeting, though the probability of another interest rate hike this year has fallen below 50%. Fed Fund futures show investors are pricing the highest chance of another rate hike for December and that is well below 40%. This suggest traders are waiting for data to confirm the so far hawkish-perceived view of the Fed before they price in any upside potential for the greenback. At 93.87, the dollar index approached the lowest level since June 2016. Dollar/yen fell to 110.88.

During the first session of the day, the euro recovered yesterday’s losses following the soft PMI readings for July. Looking ahead, traders will be focusing on the Ifo Business Climate index for July, hoping to gauge the outlook for the eurozone economy. With the PMI falling short of expectations and investor confidence weakening according to the ZEW Institute, today’s German Ifo report may add further pressure to the euro. Economists are expecting a reading of 114.9, a slowdown from 115.1 in June. Euro/dollar was last trading at 1.1665, up 0.20% on the day.

Sterling also firmed up during Asian trading. Pound/dollar is up for the third consecutive day to last trade at 1.3033. The UK has started its post-Brexit trade talks with the US in Washington.

Most Asian currencies gained against the US dollar during the Asian session. The aussie was up 0.20%, recovering most of Friday’s losses. Aussie traders will be focusing on two key events this week, June quarterly inflation data and a speech by Reserve Bank of Australia Governor Philip Lowe, both on Wednesday.

Oil extended gains above $46 a barrel following the decision by Saudi Arabia to cut crude exports in August to help ease a global supply glut. WTI was last trading at $46.55 a barrel (up 0.45%) and Brent was at $48.81 a barrel (up 0.43%).

Gold prices inched higher after hitting a one-month high in the last session yesterday. Political uncertainty in the US along with the upcoming FOMC meeting supported the increase in the price of the precious metal. Gold was last trading at $1,256.67 an ounce.

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