US Dollar Declines As Fed is Likely To Maintain Dovish Stance

March 20, 2019
US Dollar Declines As Fed is Likely To Maintain Dovish Stance April 17, 2019 Lennox Hamilton

At the European trading session on Wednesday, the US dollar declined against its biggest counterparts, cutting off its territorial gains as investors and speculators are waiting for the Fed’s comment that is expected to clarify future plans for interest rate hikes in the midst of a sluggish economy. The Fed is expected to issue a statement regarding its decision at 2:00 pm ET, followed half hour later by a news conference with Chair Jerome Powell.

It is anticipated that the Fed will maintain its benchmark rate between 2.25% and 2.5%. The Fed will unveil latest economic and benchmark rate forecasts along with the statement, with a majority of economists predicting a downgrade from two to one or possibly no rate hikes for this year.

News conference by Chairman Jerome Powell focuses on hints on the Fed’s policy position. Powell indicated a pause in his earlier meeting to the tightening cycle on signals of decelerating US economic growth. In the Asian session, the currency was trading higher, weighed by concerns over US-China trade negotiations, after a Bloomberg news report said US negotiators were worried that China was taking a stand against American requests.

The greenback dropped from a high of 1.1336 hit at 4:45 am ET to more than a2-week low of 1.1366 versus the euro. On the negative side, 1.15 is probably regarded as a good support for the US dollar. The greenback shrank from a 5-day peak of 111.69 at 9:15 p.m. ET to 111.45 against the yen. Near the 110.00 level, the major support for the US dollar is seen.

Minutes from the January 23 monetary policy meeting indicated that representatives of the Monetary Policy Board of the Bank of Japan stated that the economy of Japan is growing at a decent pace. Inflation rate is anticipated to gradually rise to 2 %, the bank said – and the BoJ is certain to maintain interest rates low for a long time to assist expedite that.

The greenback declined against the Swiss Franc to 0.9977, its lowest level since March 4. This follows a 4:30 am ET high of 1.0010. The greenback is ready to receive backing around the level of 0.98. The greenback nudged down to 1.3328 versus the loonie, 0.6857 against the kiwi and 0.7099 against the Aussie, rolling back respectively from their earlier multi-day peaks of 1.3346, 0.7057 and 0.6828. The greenback is expected to receive support around 1.30 against the loonie, 0.72 against the Aussie and 0.70 against the kiwi.

On the down side, from yesterday’s closing level of 1.3264, the greenback gained to reach a weekly high of 1.3146 against the pound. Around the 1.30 region, the greenback is seen as challenging resistance. Economic data from the Office for National Statistics indicated that for the first time in six months, UK consumer price inflation increased abruptly in February.

After a 1.8% rise in January, the consumer price index surged 1.9% year-on-year. Economists had anticipated that the rate of inflation would stay unchanged. At 2:00 pm ET, the Federal Reserve is announcing its monetary policy decision. Economists generally anticipate the central bank to maintain a benchmark rate of 2.25% to 2.5%.

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