EUR/USD Hovers Over Critical 200 DMA Ahead of Fed Meeting - How Trade the Decision
The FOMC day is finally here, and all the attention will turn to the Fed’s latest economic projections and Powell’s press conference.
Major currency pairs like the EUR/USD, gold and indexes will be in focus. But the biggest moves in FX so far this week have been concentrated in the yen pairs as the Bank of Japan finally delivered a 10-basis point rate hike.
But this first rate rise since 2007 to end the zero-interest rate policy had a “dovish hike” written all over it and the yen slumped across the board, most notably against the US dollar, as the yield differential between Japan and the rest of the world increased.
Given the recent inflation prints in the US, it was hardly surprising to see the greenback being the strongest currency so far this week.
This meant that the EUR/USD would also weaken along with other major FX pairs. But can the EUR/USD rebound from here, as the focus turns to the Fed? Is a hawkish Fed already priced in?
The fact that the EUR/USD has weakened has a lot to do with bond yields moving in the favour of the dollar following the BOJ rate hike than it has much to do with the euro.
Indeed, today we have heard from the European Central Bank's Christine Lagarde, who said that they cannot commit to the rate path even after the first cut, whenever that may be.
The ECB is waiting for negotiated wages data for Q1 and a few more inflation reports, before deciding whether to cut. The data will be released in late May. So, the first rate cut is unlikely to come before their June meeting.
The day before, ECB’s Luis de Guindos also said the ECB needs to wait for June before deciding on a rate cut.
These comments are not exactly dovish. We also had better German ZEW numbers on Tuesday which helped to limit the
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