More fundamental headwinds are expected throughout the course of this week, as we move into central bank meetings from the Fed and the BoJ, scheduled for later this week. Broad investor sentiment during the Asian session this morning looked undecided with the major equity indices showing mixed perfomances.
Analysts seem to be expecting a status quo on the Fed rates this week, awaiting more certatinity as the dust settles over the broader global economic concerns such as Brexit, and after some unhappy US payrolls data not so long ago.
The US Dollar index (DXY) has been marking a series of higher highs since the last week of June, albeit the pace of the gains has been more gradual during the month of July. The EURUSD, on the other hand, was unable to significantly maintain any levels above the 1.11 and we are now seeing it unfold back to below 1.10 and is looking increasingly bearish as the policy divergence between the ECB (expected to deliver more stimulus this year) and the Fed (gradually moving closer towards its next rate hike) becomes more accentuated.
USD strength has also prevailed against the Yen this morning with the USDJPY holding above the 50-day moving average, currently trading at the price of 106.30. The BoJ is expected to deliver more easing plans – for the markets it is more a question of what form this easing may take.
