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Dollar Declines after Fed. Holds Rate

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USD

The U.S. dollar failed to manage its gains and declined yesterday, as the Federal Reserve’s last policy meeting showed that Fed policymakers agreed they should hold off on raising interest rates until they see evidence that a recent economic slowdown was transitory. Although majority of members confirmed that a rate hike is appropriate soon, they also cited that it would be prudent to wait for more data to see if the slowdown in Q1 was really transitory. Apart from that, the discussions focused on balance sheet rebalancing, which might lessen the need for additional tightening moves down the line. In addition, Fed policymakers said they favored starting the wind-down of the Fed's massive holdings of Treasury debt and mortgage-backed securities this year. Initial jobless claims, goods trade balance, and preliminary wholesale inventories are due today.

  • The U.S. dollar index (DXY), which measures the Greenback against a basket of currencies, fell to 97 pips and could decline further during the day.

EUR

The euro recovered against the dollar and settle around $1.12 but was stuck in consolidation against the commodity currencies. Data came in stronger than expected once more as the German GfK consumer climate index rose from 10.2 to 10.4 instead of holding steady. French and German banks are closed for the holiday today so liquidity could be lower than usual during the London session. Technically, the single currency could settle high due to lack of US economic data.

GBP

The pound was still in a weak spot against most of its peers as the terror threat in the UK weighed heavily on investor sentiment. There were no reports out of the UK then while today has the second estimate GDP reading, preliminary business investment data, and the BBA mortgage approvals. No revisions are expected for the growth figure but an upgrade could yield some gains for the British currency. The sterling pound pared its losses vs. the greenback and settled near $1.30, in anticipation of GBP Gross Domestic Product (YoY) (1Q P). Technically, cable could re-test $1.30.

Gold

Gold pared its losses and settled at $1,260 per ounce. However, the precious metal could back to gain amid U.S. political uncertainty.

Oil

Oil prices fell slightly yesterday as traders reacted to a smaller-than-expected U.S. gasoline inventories draw. Meanwhile, U.S. crude fell to $51.20 per barrel, in anticipation of the outcome of the OPEC meeting.

The most important economic events:

  • USD Advance Goods Trade Balance (APR): (GMT 12:30) – Important – Forecast (-$64.5b) – Previous (-$64.2b).
  • JPY National Consumer Price Index (YoY) (APR): (GMT 23:30) – Important – Forecast (0.4%) – Previous (0.2%).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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