It’s been fairly one way traffic for equities since Asia trading. S&P 500 futures were lightly changed earlier in the day but are now up by roughly 0.5% ahead of US trading. Wall Street opened higher yesterday but surrendered gains during the session to close modestly lower. It can be argued that there was some pre-Powell angst perhaps but that looks to be clearing up now.

So, what exactly can we expect from the Fed chair later?

I won’t expect him to rock the boat amid fears of stirring up another volatility bout in markets. As such, it is likely that Powell should just reaffirm that they are looking to cut rates next month. But whether it be 25 bps or 50 bps, that is something that he won’t pre-commit to surely.

In other words, Powell will try to play it safe. The question is, will markets sense some relief for that? Or are they going to kick and scream again to force a 50 bps move? The current pricing shows that the odds of a 50 bps rate cut are priced at ~26%. So, there is some backpedaling to do there if the Fed doesn’t deliver.

That being said, there was no issue for risk trades when we went back from six rate cuts at the end of last year to just one by May. So, what’s a quarter pricing extra of 25 bps eh?

This article was written by Justin Low at www.forexlive.com.

The pound has quietly been an outperformer among the major currencies in trading this year. Amid a more resilient economy and stickier inflation, the BOE has seen their rate cut plans pushed back. And that has helped to underpin the currency as most other major central banks are on track to cut rates further.

The latest to fall in that domino is the dollar, having endured a rather punishing last two weeks. In turn, GBP/USD has made significant progress in a push from 1.2800 to now above 1.3100.

And as we look to close out the week, buyers are taking aim at the 2023 high of 1.3142 currently.

Another notable development in August is that we are seeing price push above its 100-month moving average of 1.2926. GBP/USD has had a long history of struggle against its key monthly moving averages, stretching all the way back to 2008. And so, a firm break here could very well open up scope for a stronger upside push alongside the other technical levels highlighted above.

At the end of the day, it all comes down to the divergence between the BOE and Fed. And of course how quickly things will narrow once inflation pressures in the UK begins to come under control.

But with the dollar stumbling across multiple charts, it’s tough to argue against a softer backdrop for the US currency – at least for now.

All eyes will be on Fed chair Powell next to see if he will deliver another blow to the greenback before the weekend.

This article was written by Justin Low at www.forexlive.com.

As the dollar bounced back a little, gold fell by 1% and more importantly back under the $2,500 mark. Price is still keeping above the previous triple top pattern around $2,480 but buyers will be hoping to clinch a more convincing push above the figure level to solidify the breakout status.

Instead, price action focus now turns towards the near-term chart as seen above.

The drop under $2,500 sees gold move back to test its 200-hour moving average (blue line) and buyers are holding for now. Keep above that and buyers will still be in it with a shout as we look to close out the week. But break below and sellers will start to resume near-term control for the first time since the start of August.

Fed chair Powell’s appearance is the key risk event to watch in the day ahead. That will matter for both dollar and bond market sentiment.

As such, gold will have to work with the reaction to that to wrap things up this week. For now, price action is sitting in a more neutral spot in the near-term. That considering we are seeing price trade back in between its 100 (red line) and 200-hour moving averages. And also with the $2,500 level in focus too.

This article was written by Justin Low at www.forexlive.com.

• Eurostoxx +0.2%
• Germany DAX +0.2%
• France CAC 40 +0.3%
• UK FTSE +0.3%
• Spain IBEX +0.6%
• Italy FTSE MIB +0.6%

S&P 500 futures are up 0.4% as risk sentiment holds steadier to start the session. All eyes are on Fed chair Powell’s appearance later today to set the mood before the weekend. It is anticipated that he will confirm expectations of a rate cut in September. I wouldn’t expect him to be too explicit about it though. But we’ll see.

This article was written by Justin Low at www.forexlive.com.