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Fundamental Forex Analysis

Antipodeans rally with Oil amid cautious optimism; US Q1 GDP, FOMC eyed

Optimism about progress on opening economies globally whetted risk sentiment in Wednesday’s Asian trading but investors remained cautious ahead of the key US Q1 GDP and FOMC decision.

Also, the US-China conflict over Beijing’s coronavirus response and awful US Consumer Confidence data kept the traders on the edge. Asian markets were a mixed bag, with the Japanese stocks lagging while the US equity futures jumped nearly 1.50%. The US Treasury yields, however, remained soggy, with the US dollar downed once again amid a cautious optimistic environment.

Crude oil prices extended Tuesday’s bounce, with WTI having briefly regained $14 mark. Gold prices also rose after three-day declines, in the wake of the dollar repositioning ahead of the key event risks.

On the currency front, USD/JPY continued to tack the dollar trend and fell to a new six-week low near 106.50. The Antipodeans were the top performers across the fx board, as economic re-openings down under buoyed the sentiment. AUD/USD reached fresh seven-week highs near 0.6540, also helped by upbeat Australian Q1 CPI figures. The Kiwi also followed suit and jumped back above 0.6100. USD/CAD faced rejection at 1.4000 and dropped below 1.3950, as the Canadian dollar was rescued by the oil-price rebound.

Among the European currencies, EUR/USD consolidated the Asian bounce to  1.0855 while the cable veered towards 1.2500, having added 0.50% on the day.

Main topics in Asia

Australian Treasurer Frydenberg: Australia will not bow to economic coercion

NZ Trade Balance: A monthly trade surplus of NZ$672.00 million in March

Australia Q1 RBA trimmed mean CPI +0.5 pct QoQ vs poll +0.4 pct

Italy’s Gualtieri: Economic fundamentals are solid

Oil price crash pushes Saudi’s FX reserves to 9-year low

Australian PM Morrison: Want a global coronavirus investigation

China parliament to hold annual meeting starting May 22 – Xinhua

Moody’s slashes near-term oil price forecasts

Gold Price Analysis: Currency debasement fears could push yellow metal to all-time highs

Key focus ahead        

We have a busy EUR macro calendar today, kicking-off with the German Import Price Index data at 0600 GMT. Later in the European session, a slew of Eurozone Business Sentiment and Confidence numbers will be reported at 0900 GMT, keeping the EUR, GBP traders somewhat busy. Brexit-related headlines amid uncertainty over the deadline and post-transition talks will also grab some attention for the pound traders.

Ahead of the US Open, the German Preliminary CPI and US Q1 Advance GDP release will hog the limelight at 1200 GMT and 1230 GMT. In the American mid-morning, the US Pending Homes Sales and EIA Weekly Crude Stocks Change data will be published.

The main event of note, however, remains the US FOMC monetary policy decision due at 1800 GMT, followed by Chairman Jerome Powell’s press conference at 1830 GMT. The Fed is unlikely to act at its April policy meeting but its outlook on the economy and forward guidance will be closely watched out for.

EUR/USD rises as dollar weakens ahead of FOMC

EUR/USD is reversing Tuesday’s losses on broad-based US dollar weakness. Risk-on in Asia weakened the haven demand for the dollar. Markets likely to be cautious ahead of Wednesday’s Fed rate decision.

GBP/USD: Bulls are back in motion towards 1.2500 ahead of the key day

GBP/USD defies the previous day’s weakness amid broad US dollar declines. EU sees Brexit talks ‘at an impasse’, Tories think deadline bias will push the bloc. US GDP, FOMC will decorate the calendar, virus/Brexit updates will be the key as well.

US First Quarter GDP Preview: Prelude to catastrophe or singularity?

Annualized GDP expected to be the lowest since the financial crisis. Quarter dragged down by the labor and business collapse in March. Dollar and risk aversion could jump from a difficult number.

Fed Preview: Taking a break after two months of madness? Addicted markets may fall, dollar rise

The Federal Reserve is set to leave its policy unchanged in the first scheduled meeting since January. Stocks may fall and the safe-haven dollar may rise in response. 

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