After last week’s FOMC meeting all eyes were focused on the US Dollar and the reaction the currency would have to the decision of the central bank. As we now know the Fed decided to keep interest rates unchanged citing headwinds in the global economy while at the same time expressing their confidence on the domestic economy and its recent performance.
Fed boss Janet Yellen made clear that every next meeting will be a live meeting meaning that they stand ready to raise rates at any time they see fit and that was taken as a hint towards investors and traders that a higher rate policy should be expected soon. As a result the Dollar has been gaining steadily across the board since Friday morning as investors are looking ahead and are weighing the possibility of an October rate hike.
This week the calendar will be filled with various economic reports from around the world but not very heavy on US data so it will be a good opportunity to see how the Dollar will trade on its natural demand rather than reacting to fresh data. Nevertheless there will be plenty of trading opportunities as the Euro and the Pound will be on focus will reports from the Eurozone and the UK.
On Friday the price action in the major instruments was pretty much straight-forward with the Dollar picking up a little bit of momentum against the likes of the Euro and the Pound. The US currency is receiving support after Fed’s comments that a rate hike within the next 2 months is very likely while at the same time the recent data from the Euro area and the UK were not really exciting.
The Euro is trading around the 1.1300 area this morning having come off the 1.1450 highs of last week as the Dollar is taking control of the currency. We could see further gains for the Dollar against the Single currency as there are virtually no reports during the first 2 days of the week to change the outlook of the currency and we could see the Euro retreating further towards the 1.1200 area.
The Pound was also on the decline on Friday as it retreated from the 1.5600 area to trade as low as 1.5500, this morning the currency is trading around the 1.5535 area and the outlook at this point looks mixed. The Dollar is receiving support post-FOMC and the Pound might be weak after a recent string of not so bullish UK data but the Cable has been traditionally strong in recent months so caution is advised here.
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