Dollar index rises ahead of FOMC rate decision

Wednesday, June 18, 2014

Both the dollar index and US equity markets posted gains yesterday as sentiment supported levels higher ahead of the FOMC decision later today. After facing considerable pressure over the past few sessions the DXY advanced 0.21% higher above 80.661 on speculation that policymakers were edging closer to a decision of raising interest rates. Both the S&P 500 and DJIA posted modest gains as they extended their march higher for a third session after the correction late last week on slightly weaker economic data. Yields on two year treasury notes rose to their highest levels since September 2013, towards 0.4858% in a clear sign that optimism among investors was increasing as cash continues to flow out of fixed income and into equity.

Spot gold prices tested support levels around $1,260/oz yesterday as risk appetite showed signs of improvement. However, prices were quick to recover much of the intraday decline and close slightly above $1,270/oz as geopolitical tensions, notably the unrest in Iraq, weighed heavily on sentiment. Levels this morning have drifted below yesterday’s close with the trading range throughout the Asian session relatively tight ahead of the FOMC release later today. 

Key macro events today will keep investors engaged as the day starts off with the release of BOE minutes from the June 4th-5th meeting after which attention will switch over to the US where the FOMC is due to release its rates decision. Market participants polled by Bloomberg expect the Fed to cut QE by another $10bn this month to $35bn from $45bn the previous month while keeping the fed funds target rate unchanged at 0.25%. With the US current account balance and EIA crude inventory data also due out today, investors will have plenty to look forward to.

Dollar index pushes higher on improving sentiment

DXY Curncy DOLLAR INDEX SPOT 2014 06 18 07 55 23

US 2 year treasury note yields rise ahead of FOMC decision

USGG2YR Index US Generic Govt 2 2014 06 18 08 02 09  


Events for today

0930

UK

Jun

BOE minutes

1530

US

w/e

EIA Energy Stocks

1900

US

Jun

Fed Rate

Topics: US Fed, Gold, BoE, DXY
More from: Kash Kamal