The dollar was the main driver of the price action over the past 24 hours as traders were focused on the Fed and their monetary policy meeting that proved to be very important for the US currency. The Fed didn’t raise interest rates and that was to be expected however the press conference that followed the meeting offered fresh information about the domestic economy and the central bank’s outlook.
The Fed is concerned about the rate of progress of the domestic economy and downplayed the possibility of too many rate hikes within 2016 and according to fresh expectations we’re now looking at 2 more rate hikes. As a result the dollar took a dive across the board giving up ground against its peers as investors were expecting the Fed to reduce the number of expected rate hikes this year but were disappointed by the bearish domestic outlook.
Price action highlights
The euro climbed higher against the dollar on the back of the Fed meeting and benefited from the US currency’s weakness. The single currency rallied above the 1.1200 level and this morning is trading closely to the 1.1250 area where the first important resistance lies, we need to take a step back and assess the currency pair’s outlook as the dollar might be on the defensive but 2 rate hikes are 2 more than the ECB is planning for any time soon. If investors realize that then we could see a stabilization for the euro in the medium term.
The cable also rallied higher on the back of the dollar weakness and clawed back some of the ground it had lost recently, the UK currency climbed above the 1.4200 level and at the time of typing the Pound is trading around the 1.4250 level. As long as the pound is above the 1.4200 area we could see a further extension however the bias is not too bullish as today’s BoE meeting is expected to reveal a bearish bias from the central bank as well and the pound could look for the 1.4100 area once more.
Focus of the day
The attention turns to the BoE today and it’s their turn to meet and discuss the domestic monetary policy with expectations being on the bearish side. There has been as much improvement as deterioration in the domestic economy recently but the fears of a potential Brexit is bound to find its way to the central bankers’ comments hence we could hear a concerned tone today that could put the pound under fresh pressure.
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