Daily Forex Wrap: USD Continues To Come Off Last Week's High

DAILY FX WRAP: USD continues to come off last week’s highs ahead of tomorrow’s FOMC meeting, where the presence of `patient` phrasing will be in the spotlight

The USD has spent the day on the back foot, continuing its recent pullback after last week’s record highs and break above the psychological 100.00 handle in the USD-Index. The weakness in the greenback coincides with the lead up to this month’s FOMC meeting, with much of the attention focused on the central bank’s `patience` phrasing, if this word is removed in tomorrows report, the USD could reverse this week’s losses and resume its upward trend as the Fed diverges from other global central banks.

While USD weakness has allowed EUR to strengthen slightly, the long term outlook fails to look much brighter for the eurozone currency, with both ING and Danske adding to the host of banks who have cut their EUR/USD outlook and see parity for the pair on the horizon. GBP underperformed its peers today, with the move lower attributed to a short squeeze in EUR/GBP, talk of Middle-Eastern names selling GBP/USD (unconfirmed) and UK pre-election jitters. This comes ahead of the key risk day of the week for GBP tomorrow, with UK jobs data, the UK budget and BoE minutes all scheduled to be released during tomorrow’s European morning.

Elsewhere, antipodean currencies have also been in focus today as AUD spent the European session paring its overnight losses after the RBA minutes appeared dovish, with the central bank stating they had considered another rate cut before opting to instead adopt a data dependent approach. Today also saw Fonterra Milk Powder Global Dairy Trade (GDT) Auction, an event that historically has moved the price of NZD as milk exports make up approximately 7% of New Zealand’s GDP. Today’s auction saw Fonterra's GlobalDairyTrade price index fall 8.8% and whole milk powder price index decline 9.6%, which contributed to NZD/USD ending the day in negative territory.

As well as the aforementioned FOMC rate decision and economic projections, UK jobs data, budget & BoE minutes, tomorrow also sees a host of speakers, including ECB’s Draghi (Soft Dove), Couere (Dove), BoE’s Cunliffe (Neutral) and Yellen (Dove) in the post FOMC rate decision press conference.