General market theme
The US dollar has been in focus over the past 24 hours as the Fed held their monthly meeting on monetary policy and their interest rates’ agenda was the key point of their press statement after the meeting was over. The Fed decided to leave rates unchanged of course and left the door open for a higher rate policy moving forward but the surprise was that the market wasn’t satisfied from this development.
It seems that traders needed something more substantial from the US central bank to consider its stance as bullish because after the press statement hit the wires the dollar suffered strong losses across the board. Investors seem to believe that the Fed had little choice but to say that leave will consider a higher rate policy during this year but also that they don’t really intend to do so hence the disappointing performance of the dollar on the back of the meeting.
Price action highlights
The euro rallied on the back of what traders considered a disappointing Fed statement and this morning the currency is approaching the 1.1100 level having traded off the 1.1000 area over the past 24 hours. The bias hasn’t changed suddenly but it seems that the ECB’s intention not to lower rates for now combined with the Fed’s lack of a bullish agenda has allowed the euro to benefit, whether this is to last though it’s a different question.
The cable also profited from the dollar’s reaction to the Fed meeting and press statement and the currency rate broke out of its previous sideways pattern and looked to the upside. The pound managed to overcome the 1.3200 barrier yesterday but overnight trading took the rate below this level once more and it is now important to see whether this breakout will hold. Should this be the case the Pound could hope for further extension towards the 1.3300 resistance level.
Today's focus
German unemployment levels and inflation figures are the first noteworthy reports on our calendar today and it looks like the figures will print in favor of the euro which in turn might allow the single currency to extend its recent gains. Later in the day the US release of Initial Jobless Claims is expected to show a pickup in the number of people claiming jobless benefits, hence the dollar could remain weak should this be the case.
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