Yesterday saw the release of the long awaited monetary policy statement from the Fed, as many predicted the Fed to hint at the beginning of a rate hike in the next couple of months, and many hoping for a hike in June. The Fed did indeed drop the ‘Patient’ phrase from their monetary policy statement; however severe changes were made to the expected Fed Fund rate at the end of the year, as the expectation almost halved at 0.625% with expectation in December at 1.125%, therefore showing a much slower pace in rate hikes for the U.S. Markets digested this information as severely negative for the USD index, as it fell to lows at the 96.6 mark. With Yellen unable to bring much reassurance in her press conference, and the statement became very dovish for the Fed’s usual hawkish tone, as they saw key figures of inflation and GDP being revised down. EUR/USD made massive gains briefly breaking above the 1.1 mark, as GBP/USD momentarily broke above the 1.51 mark. While traders had waited for USD/JPY to finally surge, with this news it plummeted to below the 119 mark. The news sentiment caused one of the sharpest declines seen in the USD index in a while, as it fell by 2.5% within a couple of hours.
Today began mainly with the USD index paring back its losses from yesterday after being oversold after the statement and press conference from Yellen. The index momentarily broke above the 99 mark and currently trades around 98.7, as it begins to consolidate around this area before continuing a likely surge towards the 100 mark. Though the Fund rate expectation is lower for the end of year, it becomes clear that an initial rate hike is likely to occur soon yet highly unlikely to be in April. Also it is important to note that the Fed expressed the view that expectations will be data dependent and therefore a bout of good economic data over the year may speed the pace of its rate hikes. EUR/USD made the largest fall today breaking below the 1.07 mark, as the move was supported by a higher than expected Targeted LTRO of 97.848 billion in comparison to an expected figure of just 40 billion.
Other than that a fairly news-free day as talks between Greece and Europe will continue throughout the day in the European Summit, while later will see the release of Jobless Claims data from the U.S. Also a focus later tonight will be the release of the monetary policy statement from the BOJ, though it looks unlikely there will be any drastic changes.
That’s the wrap for today, Good Luck with your trading endeavours.