Traders worldwide are bracing for significant market movements as the Federal Open Market Committee (FOMC) Minutes are set to be released on Wednesday. The anticipation surrounding Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium adds to the cautious sentiment among investors. Against this backdrop, traders are taking caution to place new bets…especially in the FX markets.
As traders remain doubtful going into major Federal Reserve releases. Consequently, the EUR/USD currency pair has remained within a narrow band. The latter is what investors are most closely watching, especially in the case of these FOMC Minutes and Powell’s speeches. For this reason, many have taken a wait-and-see approach, depending on high-stakes trades until they can collect more information.
Furthermore, the USD/JPY is seeing no follow-through buying. This is mainly a reflection of the divergent expectations from the Bank of Japan (BoJ) and the Federal Reserve. At the time of writing, the USD/JPY pair is finding it difficult to gather momentum and holds just under the key 148.00 level. To the surprise of no one, analysts are pointing to a historic divergence in policy outlooks. This gap is counteracting safe-haven demand that typically boosts the Japanese Yen.
With tensions mounting, former President Donald Trump’s trade war looks set to further intensify. Analysts have pointed out that “Five reasons why Trump’s trade war is likely to escalate.” It’s a great time to be in the market, and the US economy continues to boom. This double whammy, paired with surging customs revenues, means that trade tensions will only get worse. These tensions are projected to lower global output by 0.7 percentage points in the medium term. This shift would have major economic consequences.
Investors are understandably cautiously optimistic about a peace deal being struck between Russia and Ukraine. lick to enlarge This settlement might fundamentally change the competitive landscape. Source: Fed rate cut bets limiting US Dollar strength This environment is contributing to a wait and see mood in the marketplace.
In Asia, the AUD/USD pair was a shade higher, making a run for the 0.6500 level in Tuesday’s session. In spite of this modest development, the AUD/USD pair does not see much bullish conviction as it is met with conflicting signals from multiple economic indicators.