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First rate cut in over a decade anticipated for the Greenback

USD - United States Dollar

Just as the Fed seems poised to announce the first interest rate cut since the financial crisis, President Trump took his argument with the Fed one step further, saying it, "…has made all the wrong moves.“ Despite that, Trump may have gotten everything he's wanted from the Fed so far; he wants to see a large cut from the Fed. He tweeted yesterday, "…a small rate cut is not enough, but we will win anyway!"

According to Bloomberg, U.S. delegates including Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are in China for meetings with their Chinese counterparts, with both sides expected to dine together today before the talks tomorrow. Hopes remain low for a breakthrough as neither party seems eager to make a deal.

On the release side, U.S. consumer spending and prices rose moderately in June. The data pointed to slower economic growth and benign inflation that could see the Fed cutting interest rates tomorrow. Personal income increased $83.6 billion (0.4 percent) in June according to estimates released today by the Bureau of Economic Analysis, which aligned with expectations. Disposable personal income (DPI) increased $69.7 billion (0.4 percent) and personal consumption expenditures (PCE) increased $41.0 billion (0.3 percent), which also aligned with expectations.

Key Movers

Currency market participants are pricing in a no-deal Brexit scenario. The GBP/USD pair dropped towards 1.2119 on Tuesday, extending Monday's decline. The pair has fallen 2.1 percent so far this week, and it is trading at 1.2175 at the time of this writing. Furthermore, market participants are pricing a more than 60 percent chance of a 25 basis point rate cut by December based on the concern that the U.K. may leave the European Union without a deal. According to JP Morgan, British policymakers might lower their growth outlook and abandon raising rates when they announce their decision and release their inflation report later this week.

Additionally, the Bank of Japan trimmed its growth outlook for the year through March to 0.7 from 0.8 percent, saying it wouldn't wait to ease if it thinks risks to its price target are increasing.

Expected Ranges

USD/CAD: 1.3144 - 1.3219 ▲

EUR/USD: 1.1102 - 1.1172 ▲

GBP/USD: 1.2077 - 1.2267 ▼

AUD/USD: 0.6846 - 0.6910 ▼

NZD/USD: 0.6559 - 0.6616 ▼