USD highlights

Dollar gained some lost ground after Fed kept rates on hold and reiterated that inflation remains the primary concern. EURUSD traded to a low of 1.3734 while USDJPY traded to a high of 119.05. Although the recent market volatility and tighter credit conditions were mentioned in the statement, the Fed is still optimistic about growth picking up in the future.

Weaker than expected retail sales growth in July brought the Pound to its lowest level against EUR for the past 2 months. EURGBP traded to a high of 0.6818 and is still hovering above the 0.6800 levels. Sterling is also pressured by the recent run of weaker than expected data, causing the market to pare back on expectations for further BoE hikes. Attention will be turned to the BoE Quarterly Inflation Report for clues on the rate outlook.

RBA raised rates to 6.50% as expected. AUDUSD rose as a result but remain under 0.8600 as market remains concerned over the stability of the US stock and credit market. However, RBA cited developments to date do not appear to have change the broader global outlook and world commodities prices will remain a driver for the Australian economy.

XAU/USD Gold remains on the uptrend. Buy on dips to 665 target 685. Place stop below 650.