The dollar is slightly softer on the day as it consolidates at recent multi-month lows. The DXY is now interestingly perched on a long-term trendline going way back to 2011. Markets seems fairly calm with US stocks marginally up and gold above $1950.

A dovish-leaning Fed is expected by traders this evening as hopeful signs of a V-shaped recovery have petered out, with rising infection and death rates stalling improvements in consumer activity and labour markets. Does Chair Powell give what markets want and harden forward guidance, linking the future path of rates to specific economic conditions? Such an announcement will probably put further pressure on real yields, and delight gold bugs.

The whole question of forward guidance is a fascinating one. Tying Fed policy to a 2% inflation target for example, seems somewhat fruitless when their favoured inflation indicator, core PCE, has only hit that figure eleven times in more than ten years! If the Fed can’t hit 2% when it is pumping money like never before, then for sure tightening policy seems light years away.

EUR consolidation

Prices are tracking just under 1.1780-1.1830 resistance although pullbacks still look corrective at this stage. Another leg higher does look possible, with a break of 1.1830 opening up a run to 1.19, but after the move higher we have witnessed, a healthy pause is good for bulls. Support lies around 1.1690 with a long-term trendline from 2008 just below here around 1.16.

Cable still marching higher

Now on its ninth day of gains, GBP/USD continues to trade higher and into resistance at 1.30. The March high just above 1.32 is a target, before the medium-term resistance zone from 1.33-1.35. Only a decline through 1.2860-1.2770 would be the first warning sign that this bull phase is turning around.

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