USD Selling Pressure as Risk On Remains Ahead of FOMC

A continuation of the market sentiment that commenced at the start of the week, has been observed in the morning of the European session.

Heavy selling pressure observed for the USD, against most of its riskier peers; AUD, NZD, GBP, CAD, stocks rising in Europe and the United States, oil prices shooting higher, recovering some of the overnight slump.

Why are such moves being seen?

It appears to be as we noted in the blog on Monday, very much a relief that economies are starting to get back to business with the easing in lockdown restrictions. These have been announced in Australia, New Zealand, some easing in Germany and the United States, with Italy next week.

Furthermore, the prospects of treatment for Covid-19 remains in the pipeline, as the testing of Gilead’s Remdesiver drug keeps markets optimistic. Results are said to be expected by mid-May.

In terms of the FX markets, there could additionally be some caution from players, not wanting to hold USD ahead of the FOMC rate decision on Wednesday. No big policy changes are expected, given the huge measures already taken by the central bank over the last going on two months. Nevertheless, given the economic damages of the U.S. economy, more action cannot be ruled out. A lack of new measures could provide a relief rally to the USD, however if they do surprise, expect further selling pressure.



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