A typical pre-Federal Reserve event caution trading dominated Wednesday’s Asian session, with Asian stocks, US equity futures and Treasury yields on the back foot, highlighting the tepid risk sentiment.
Meanwhile, the greenback attempted a bounce across the board following the overnight drop, as Gold prices treaded water around $1,500 levels.
USD/JPY consolidated its recovery in a tight range around 108.20 region, despite upbeat Japanese trade data and escalating South Korea-Japan trade row. Heading into Europe, the EUR/USD pair remains on the backfoot below the 1.11 handle while GBP/USD keeps losses below the 1.25 handle, both awaiting fresh impetus for the next push higher.
Ahead of the key event risk for Wednesday, the FOMC monetary policy decision due at 18:00 GMT7 and Fed Chair Powell’s press conference, traders will closely watch the inflation figures from the UK and Eurozone. The UK Consumer Price Index will be reported at 08:30 GMT, followed by the Eurozone CPI release at 09:00 GMT alongside the bloc’s Construction Output numbers.
Meanwhile, the US Housing Starts will drop in at 12:30 GMT, parallelly to Building Permits data. Later at 14:30 GMT, oil traders will focus on the Saudi Defence Ministry’s press conference and the US Energy Information Administration (EIA) weekly Crude Stocks data. Saudi Defence Ministry is likely to reveal the evidence of Iran’s hand in the Saud attacks.
Next of note remains the FOMC rate decision, with a 25bps rate cut already factored-in and therefore, all eyes will remain on the Fed’s projections, dot-plot chart and Powell’s speech for the Fed’s future monetary policy path and its impact on dollar trades.
Oil prices have been consolidating their losses after Saudi Arabia announced it is able to restore a substantial part of its lost oil production.