US markets rise slightly ahead of the Fed decision
US dollar and stocks rose slightly ahead of the interest rates decision by the Federal Reserve. Fed officials are expected to lower interest rates by 25 basis points. Since the rate cut has already been priced-in by the market, investors will be looking at the language used by the officials. This language will guide them on the number of interest rates to expect later this year. ADP released the non-farm payrolls data for the month of July. The numbers showed that the economy added more than 156k jobs in the month. This was slightly higher than the consensus estimate of 150k.
The euro was relatively unchanged after a series of mixed economic data from Europe. In Germany, the unemployment rate remained unchanged at 5.0% while the unemployment change declined by 1k. In Italy, the unemployment rate declined to 9.7%. In the EU, the headline CPI rose by 1.1%, which was slightly below the previous 1.3%. The preliminary GDP data for the second quarter showed that the economy rose by 1.1%, which was slightly lower than the Q1 growth of 1.2%. The unemployment rate declined from 7.6% to 7.5%. In Germany, retail sales declined by -1.6% in June.
The Australian dollar was relatively unchanged today after the country released inflation data for the second quarter. In the quarter, the headline CPI rose by 1.6%, which was higher than the first quarter’s growth of 1.3%. On a QoQ basis, the CPI rose by 0.6%. In the quarter, the trimmed CPI rose by 1.6%, which was better than the expected 1.5%. These numbers raise the probability that the RBA could pause on further rate cuts. In nearby China, the manufacturing PMI rose to 49.7 from the previous 49.6.
The EUR/USD pair was relatively unchanged in the Asian and European session today as investors waited for the Fed interest rates decision. The pair is now trading at 1.1147, which is slightly lower than the day’s high of 1.1160. This price is along a narrow channel that the pair has been in during the past two days. The pair is also below the 50-day moving averages. A dovish Fed will likely take the pair to the 38.2% Fibonacci Retracement level at 1.1225 while a hawkish Fed will likely take the pair to below 1.1100.
The AUD/USD pair was relatively unchanged today and is currently trading at 0.6890. This price is slightly above the week’s low of 0.6860 and slightly lower than the 23.6% Fibonacci Retracement level. The price is along the 50-day moving averages and slightly below the 100-day moving averages. Like with the EUR/USD pair, the AUD/USD pair will remain in this level ahead of the Fed rates decision.
The GBP/CAD pair declined sharply today and reached a low of 1.5950. This was the lowest level since August 2017. On the daily chart below, the pair is along the lower line of the Bollinger Bands and is below all the short and medium-term moving averages. The RSI has moved to the oversold level of 25 while the momentum indicator is below the 100 level. The pair will likely continue the downward trend as uncertainties on Brexit continue.