The long-awaited FOMC June meeting will be held on Wednesday June 14th, at 19:00 BST. Per CME’s FedWatch tool, the probability for a June rate hike has climbed to 99.6%. It indicates that markets regard a June rate hike almost certain to happen.
Originally the markets assumed the Fed would raise rates twice more by end of the year; in June and in September respectively. Currently, some traders speculate that the Fed will address a more dovish economic outlook after announcing a June rate hike decision implying a less likely September rate hike.
The tone of the Fed’s statement on Wednesday will be the key to affect USD and gold strength this week. The dollar index has seen a substantial 3.78% retracement since April 10th, hitting a low of 96.44 on June 7th, last seen on November 9th. The bears are currently testing the psychological support level at 97.00.
USD prospects remain moderately bearish, if the Fed address a more hawkish outlook it will likely provide USD support. However, as the investigations on Trump’s Russia leak scandal is still ongoing, USD is still under pressure due to political turmoil until more evidence is released showing Trump’s innocence.
Spot gold has seen a substantial 2.2% retracement since June 7th, due to profit-taking and the release of the UK general election outcome which has eased markets’ risk-off sentiment. The price has been consolidating since Friday evening, holding above the significant support line at 1260.
The UK inflation data (CPI and PPI) for May will be released at 09:30 BST today. it will likely affect GBP crosses.