The consolidation of Monday has been a platform for the dollar bulls just to get ahead slightly today. The question is whether it is a move that will have legs. There does not seem to be any discernible move higher on Treasury yields, or shift in US interest rate futures that would suggest there has been a notable change on positioning for the FOMC meeting. However, these dollar gains are having an impact on several major markets which are now approaching key crossroads both technically, but also ahead of key fundamental events. For example, EUR/USD is slipping back to test the near term support band $1.1180/$1.1200 that has provided a floor in recent weeks . This is coming ahead of what is going to be a crucial meeting for the ECB this week. The euro has come under pressure with pricing for a deposit rate cut of 10bps in the balance. Cable is falling away again ahead of an announcement of a new UK Prime Minister (expected just before midday UK time today), widely expected to be the more euro-sceptic Boris Johnson. Prospects of a harder “no deal” Brexit that potentially could come with Johnson have weighed on sterling throughout the summer. But we are also seeing a crucial moment for the gold bulls too. Gold has slipped back by over $35 (around 2.5%) since last Friday’s multi-year high and is now testing the bullish outlook.
Wall Street closed mildly higher last night with the S&P 500 +0.3% at 2985, whilst US futures are another +0.1% higher today. In Asian markets, the outlook is also positive with the Nikkei +1.0% and Shanghai Composite +0.5%. European indices are set for decent gains too, with the FTSE futures +0.4% and DAX futures +0.6%. In forex, there is a move back into the dollar which is seen across the major pairs. For commodities, the USD strength is pulling back gold once more, which is around -$7 lower (c. -0.5%), with oil a shade higher.
There is still very little to get the pulses racing on the economic calendar for the European session this morning. It is not until later on when Eurozone Consumer Confidence is released at 1500BST. Consensus is looking for no change in July to remain at -7.2 (7.2 in June) which would further argue that confidence has stabilised in 2019. US data comes with Existing Home Sales at 1500BST where the consensus forecast looking for very little change, with the slightest dip back to 5.33m in June (from 5.34m in May). There is also the Richmond Fed Composite index at 1500BST which is expected to improve slightly to +5 in July (from +3 in June).