FED TAKES CENTRE STAGE ON WEDNESDAY
Monetary policy will dominate the headlines on Wednesday, as traders turn their attention to the Federal Reserve. The US central bank will conclude its policy meeting with a highly anticipated press release that could provide a blueprint for future interest rate adjustments.
Ahead of the Fed, traders can expect a steady stream of economic data from Europe, beginning at 07:15 GMT with reports on Swiss industrial production and producer prices.
About an hour later, the UK’s Office for National Statistics will release a deluge of inflation data, including the retail price index, consumer price index and producer price index. The highly anticipated consumer inflation report is expected to show CPI growth of 2.5% annually in May, compared with 2.4% the month before.
Shifting gears to the broader Eurozone, data on industrial production and employment will make headlines at 09:00 GMT. Industrial output in the 19-member currency zone likely fell 0.5% for April. Employment is projected to rise 0.3% in the first quarter.
In the United States, the Department of Labor will issue its monthly report on producer inflation at 12:30 GMT. The producer price index is forecast to rise 2.8% annually in May, up from the previous month’s 2.6% rate.
The Federal Open Market Committee (FOMC) will conclude on Wednesday with an official press release at 18:00 GMT. The central bank is widely expected to raise interest rates at that time. Investors will be carefully reviewing the official policy statement for clues about the future path of interest rates. The June statement will be accompanied by a revised summary of economic projections covering GDP, unemployment and inflation.
Europe’s common currency backtracked against the dollar on Tuesday, as regional tensions continued to dampen the outlook for the single currency. Meanwhile, rate-hike bets fueled modest gains for the dollar ahead of the Fed’s highly anticipated rate announcement. EUR/USD is back to trading in the mid 1.1700 region after opening the week above 1.1800. The pair faces immediate resistance at 1.1830. On the opposite side of the spectrum, initial support is located at 1.1767.
After a strong buildup last week, cable is back on the defensive. GBP/USD has pulled back roughly 130 pips from last week’s highs and is currently trading around 1.3363. The recent skid pulled cable back below the 1.3395 support level. The pair is now testing the 1.3360 support zone. On the flipside, immediate resistance is located at 1.3450.
The North American pair is back above 1.3000 as monetary policy continues to impact investor sentiment. USD/CAD is currently trading at 1.3018 with an eye for bigger gains later in the day. The Canadian dollar, meanwhile, is at the mercy of oil-price uncertainty tied to OPEC.