Our expert team provide detailed analysis and key insights on the latest movements and events that affect market prices.
With the Bank of Japan having tweaked its monetary stimulus, all eyes are now firmly on the Federal Reserve. The Fed is expected to keep interest rates on hold at today’s meeting, citing recent weak economic data and moderate inflation, but what about the likelihood of a hike by the end of this year?
The US dollar is firmer heading into today’s Federal Reserve policy verdict.
As of today, activity on the US sovereign bond markets price in a mere 22% chance for a rate hike to be announced today. The odds of a hike in December are currently priced in at only 58%.
The EURUSD has fully given back a month worth of gains and is ready to test 1.1120 on the downside. A break below the 1.1100/1.1085 mark should encourage a further sell-off towards 1.1000. If we surpass 1.1200, the bullish trend reversal could encourage buyers for a recovery to 1.1300/1.1327.
We expect two-sided volatility in the US dollar crosses. Any dovishness from the Fed should signal a narrower divergence between the US’ monetary policy versus the rest of the world, and should allow the majors to appreciate against the US dollar, while a satisfactory hawkish rhetoric should provide a solid mid-term basis for a further appreciation in the US dollar globally.