Yesterday’s Federal Open Market Committee announcement and press conference proved not to be the non-event many had characterised it as. The market deemed the event a dovish one and as a result sold the greenback and bid up global stock markets.
The main change in language from the central bank came in the direct context of raising rates. The Fed dropped its sentence regarding ‘further gradual increases’ in favour of being ‘patient’. This shift sends the message the Fed are now around a level they consider to be neutral citing subdued inflation and global uncertainties such as Brexit and trade wars. The Fed are essentially now in ‘wait and see’ mode.
The meeting left the greenback nursing some losses. Cable (GBPUSD) shot straight back above the $1.31 level, finding resistance around the $1.3140 figure. The next true test of this latest move comes in at the $1.32 level, a price which proved considerable resistance at the start of this week. With Brexit at a critical point, the euro achieved more gains against the buck last night, pushing the GBPEUR cross rate down towards the €1.14 mark.
Today’s trading session sees a host of European PMI readings as well as GDP numbers. The US will also be catching up on some of the releases it missed during the government shutdown.
Written by Viv Savani. 8:38am, January 31st 2019
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