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    Asian Session – Dollar edges up ahead of FOMC statement; China stocks stage a late rally

    Shares in China were heading for a fourth-day of losses but staged a late rally to turn positive. The Shanghai SE Composite jumped by 3.5% in late Asian session and the Shenzen CSI 300 index was up by 3%. Equity prices appear to be stabilizing after China’s regulator said it would be buying more shares and has hinted at additional measures to boost liquidity.

    In Wall Street, investors put aside concerns over China as shares closed higher on Tuesday for the first time in 5 days as disappointing earnings and the sell-off in China had weighed on US stocks in recent days. The focus now is on the Fed, which will conclude their two-day meeting later today. July’s FOMC statement is significant even though no change in policy is expected because this is the last meeting before September, when a rate hike is widely expected. Markets will be closely scrutinizing the wording of the FOMC statement for a signal that the Fed is preparing to raise interest rates. But it’s unlikely the Fed will give too much away as several factors such as increased risks from China could sway the Fed from raising rates by the time of the September meeting.

    The dollar index moved higher in late Asian session, recovering some of its losses from Tuesday’s US session. The greenback jumped to 123.64 against the yen from an earlier low of 123.32. The euro was weaker against the dollar, dropping from a high of 1.1083 to 1.1046, and was also softer against sterling at 0.7079. Cable managed to hold on to the 1.56 level after yesterday’s strong GDP figures and was trading at 1.5603 in late Asian session.

    The aussie was unable to sustain Tuesday’s gains against the dollar as it slipped to 0.7320 on continued weakness in oil prices. Brent crude prices were down by 0.3% to $53.14 in Wednesday’s Asian trading. Meanwhile, the kiwi headed higher, rising to 0.6702 against the greenback after comments from Reserve Bank of New Zealand governor Graeme Wheeler boosted the currency. Wheeler said at a speech that there are currently several factors supporting economic growth, suggesting that any further reductions in the cash rate are unlikely to be as aggressive as some analysts have anticipated.

    As markets await the FOMC statement from the Fed’s July policy meeting, there is little else to keep investors busy until then apart from US pending home sales for June. Markets will also be looking to tomorrow’s US second quarter GDP numbers for further direction.

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