The greenback experienced its biggest drop in 2 months as the Fed delivered an on target 0.25% rate hike and left it’s outlook unchanged at 3 hikes in 2018. The FX market had been positioning itself for a more Hawkish hike and the dollar had appreciated into the meeting – not for the first time in recent history and once again the Fed delivered on expectation and the market corrected. The FOMC did move it’s rate forecasts up for 2019 and 2020 up but new Fed Chair Jerome Powell reiterated previous guidance that gradual rate hikes are appropriate moving forward. One of the best beneficiaries on the day of the dollar’s fall was the Cad which was already on the rise, along with the Mxn after more positive Nafta news as the US confirmed that it will drop it’s demand for 50% US made content in imported cars.
Sterling also appreciated earlier in the day after better than expected Average Earnings numbers and a drop in the Unemployment Rate, cable finished the day up around 1.4140 near recent highs having begun it down near 1.4000. The Aussie had come under pressure earlier in the day as news that China is preparing to counter proposed US tariffs filtered through to the market but finished up nearly a big figure higher against the dollar and on the crosses after the Fed announcement.
The RBNZ kept rates on hold this morning as widely expected but forward guidance of weaker inflation in the near term has kept a cap on the kiwi after the announcement.
Looking ahead to todays trading and there is plenty of opportunity coming in the sessions. In the Asian session we start of with the potentially volatile Aussie employment data, it’s been fairly whippy recently and traders will be watching the components carefully again today on the release. Japan is back from a day’s holiday so we will see a bit of extra interest in the Nikkei’s moves today. Into the London session and once again the focus is firmly on the UK and sterling products, Retail Sales numbers are due out first, but the Band of England’s latest rate announcement will dominate proceedings – no change is expected but traders will be looking at the Monetary Policy Statement for signs of a possible May hike.
Into the US session and it’s light on the ground in terms of fundamental data releases, however, the news wires should keep market participants busy especially looking for any confirmation of President Trump’s China tariff release.