The U.S. dollar is once again trading on the backfoot with the Bloomberg Dollar Spot Index falling to a fresh three-month low.
Overview
Indeed, the dollar also touched its weakest level versus the Euro since the pair’s brief pop higher in March. Excluding that blip, EUR/USD is at its highest level since last June.
This morning’s data showed that U.S. consumer prices declined in May for a third straight month. CPI fell 0.1% from the month prior after a drop of 0.8% in April. The so-called core CPI, which excludes food and fuel, also fell 0.1%. The data is expected and is likely to allow the Fed to continue their easy policy for the foreseeable future.
This conclusion of the Fed’s two day meeting this afternoon is the biggest risk event on this week’s schedule. The central bank is unlikely to change its current policy with all economists expecting rates to stay at a 0.0% to 0.25% band. Most also expect the Fed to indicate is not ready to pull back from the massive stimulus that was announced early in the Covid crisis. The central bank will also release its first quarterly forecasts of the year, which may attract the most attention. Fed Chairman Jay Powell will begin his press conference at 2:30 p.m.
What to Watch Today…
- FOMC Policy Decision at 2 p.m.
Complete Economic Calendar can be found here.
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AUD
The Australian dollar was a big winner overnight, surging as much 0.80%. A report showed that Australia’s household sentiment rebounded to pre-Covid levels. The combination of higher equities, a brighter outlook for China and dwindling Covid cases has been winning cocktail for AUD/USD.
The New Zealand dollar was also able to ride the Aussie’s coattails higher.
GBP
The British pound continues its historic march higher against the greenback. Sterling is set for a 10th straight day of gains versus its American counterpart, which would be the longest streak since April 2002. While we believe much of the sterling’s strength has more to due with general dollar weakness, there are positive signs for the U.K. The nation recorded its lowest level of new cases in months and Prime Minister Boris Johnson is set to announce reopening guidelines.
