There is a palpable apprehension in the air as almost every asset class seems to be frozen into procrastination. For weeks crude prices have traded around $60, gold around $1200, the Dow Jones Industrial Average around 18,000 and most significantly EURUSD has failed to break below parity. In the past few days the dollar has gone nowhere and the bond market rout has stabilised. Investors are readying themselves for Thursday’s Eurozone finance minister meeting which is widely being seen as make or break for Greece. The reason why it’s different this time is because without something agreed before the huge payments that are due at the end of this month Greece is going to seriously struggle to repay the IMF in June, let alone July and August and any deal will need to be run past the Greek parliament. So for now many investors are in wait and see mode, whilst others are shedding their exposure to riskier assets as European indices continue with their downward slide.
On top of this the market is also in semi-paralysis ahead of tomorrow’s FOMC rate decision where the hope is that further detail will be forthcoming as to when we can expect the first rate hike from the Federal Reserve. An update to economic projections with a new dot chart should provide not only greater guidance as to whether we’ll see just one or two rate hikes this year and determine whether September is the favourite for the first one, but also give a better idea of when and where the end rate will be, currently expected to be above 3.00% by the end of 2017. The lack of dollar traction suggests the market is preparing for a dovish statement tomorrow which would keep a lid on any upward dollar momentum, making yet again EURUSD the key FX rate to watch.