A quiet one on the agenda in Europe later today

After the hustle and bustle to start the week, things are much calmer and quieter in the new day. Major currencies are lacking appetite with the dollar having slumped heavily in trading yesterday. As geopolitical tensions fade, risk trades got a boost yesterday with the S&P 500 now sitting within 0.9% of another record high. But for now, US futures are flattish and that’s not leaving much for currency traders to work with either ahead of European trading.

As the Iran-Israel conflict fades into the background, the focus switches back towards the usual suspects. And that means figuring out the balance struck between Trump’s tariffs, trade tensions, the impact of the economy, and central banks’ reactions.

Of note, Fed chair Powell came out yesterday to open the door towards cutting rates but reaffirmed two-sided risks to the equation. The key line in my view is that he said that policymakers would expect prices to rise for the most part in Q3. And that pours cold water on any rate cuts for July at the very least.

The question now is will they look to cut in September then? Traders have fully priced in a 25 bps move for the end of Q3, so we’ll see how things progress from here. By year-end, we’re seeing ~60 bps of rate cuts priced in now.

Looking to European trading today, it’ll likely be a quiet one with market flows to dictate trading sentiment. The economic calendar isn’t going to excite with just Spain final Q1 GDP and Switzerland UBS investor sentiment on the agenda.

So, it will be a continuation of market flows adjusting to the post-conflict situation in the Middle East. That before month-end starts to creep in by Friday and next Monday.

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