USD Risk: CPI & FOMC Today

Major Volatility Risk For USD

The US dollar is trading 97.49 last, heading into today’s US session. The USD faces a high risk of volatility today with both November CPI and the FOMC meeting due. Inflation is forecast to have grown at 0.2% last month, down from the prior 0.4%.

Looking at the FOMC, the Fed is not expected to ease further. However, it will likely reaffirm its message that it could be forced to act again in the near future if the economy weakens further.

EUR Traders Waiting on ECB Tomorrow

EURUSD will be largely linked to USD flows today ahead of the ECB meeting tomorrow. Traders are eagerly awaiting the first meeting from new ECB president Lagarde. Industry commentators expect that Lagarde will stay close to the recent message delivered by former ECB head Mario Draghi.

In short, Lagarde is likely to reassure investors that the ECB will do all it can to achieve its inflation target, keeping the door open for further easing. EURUSD trades 1.1083 last, still above the 1.1024 support for now.

UK Elections Due Tomorrow

GBPUSD remains supported heading into the UK elections tomorrow. The Conservative party is widely expected to win a majority, supporting the view that the UK will press ahead and leave the EU under the terms of Boris Johnson’s Brexit deal by January 31^st next year.

Any other result will represent a shock and likely see GBP lower in the near term. GBPUSD trades 1.3145 as of writing, just off yesterday’s highs.

Risk Recovers – Though Traders Still Jittery

Risk assets posted a firm recovery over the last 24 hours in response to reports that the US is weighing up postponing the next round of tariffs which are due to come into effect on December 15^th.

If tariffs are postponed, this would be strongly supportive of risk sentiment and should see equities trading higher into the end of the year. SPX500 trades 3134.48 last, still sitting atop the 3132.56 level for now.

Safe Havens Rally

Safe havens have been firmer today with both JPY and gold higher against USD. The FOMC meeting today will be a key driver for short term price action. USDPY trades 108.69 last, moving further down off the week’s highs. XAUUSD trades 1467.07 last.

Crude Higher on Trade Deal Hopes

Oil prices have been bolstered once again by renewed optimism over a US-China trade deal and the prospect of further US tariffs being avoided.

The recently announced set of deeper OPEC cuts (cuts to extend from 1.2 million barrels per day to 1.7 million barrels per day, are also helping to support crude prices. Crude trades 59.05 last ahead of the EIA inventories report due later today.

FOMC in Focus

USDCAD remains subdued today ahead of key US risk events later. The potential for a more dovish tilt to the FOMC could see USD trading lower over the rest of the week. Meanwhile, strength in crude prices is likely to keep CAD supported. USDCAD trades 1.2335 last, back above the 1.3207 level.

Aussie on The Rebound

AUDUSD has been under pressure this week as concerns around the health of US-China trade talks have weighed on risk sentiment. However, with risk sentiment rebounding here, AUD has found some support. However, with hopes for a trade deal improving we have seen a strong reversal so far today with AUDUSD back up at .6832 as of writing.