As the FOMC starts its two-day meeting, US Treasury yields rose, underpinning the dollar ahead of Wednesday’s announcement. The central bank is largely expected to leave its monetary policy unchanged, but markets are broadly expecting another three rate hikes this year for the US, and traders will be looking for hawkish language from the FOMC on Wednesday’s meeting. Ahead of the event, the EU will see the release of the final versions of the Markit Manufacturing PMI and more relevant, the EU Q1 preliminary GDP figure.
The US Dollar continues to gain against the Japanese Yen as it has since the end of March, currently trading at 109.80 levels. The US Federal Reserve is not thought likely to raise interest rates on Wednesday, but it is expected to keep the door wide open to a move higher in June, contrary to Bank of Japan, that is thought to unlikely tighten its own monetary policy for months.
Pound remained under heavy pressure on Tuesday after the UK Manufacturing PMI fell to a 17-year low, currently trading flat through the Asia session against the dollar, holding just above the 1.3600 handle ahead of the European market session. Although an upward correction is not out of the table, much of the upcoming move will depend on how the market reacts to Fed’s statement.
The API reported a larger than expected crude inventory build while the U.S. Energy Information Administration said Monday that oil production rose to a record 10.264 million barrels a day in February. Crude Oil is trading at around $67.50 a barrel, as market participants seem to have priced in a US withdrawal from the Iranian deal.
Gold prices continue to slide, as they have been pushed down to near the $1300 support level, as the stronger US Dollar continues its rally.