Dollar Gains On Hawkish Fed
The Federal reserve was more hawkish than anticipated and the meeting most likely marked the first step of the Fed taking the foot off the gas. Economists at Danske Bank think the message from FOMC and the likely path for US monetary policy support their call for a lower Euro against the Dollar. The pair is forecast at 1.15 in 12 months.
The Dollar strengthened to a 2 month high against the Euro with the pair jostling around 1.2000. The move caused by the interest rate hike expectations by 2023 from the Fed which caused an influx of buyers in the greenback.
Sterling gained some positive traction on the Dollar following the release of hotter-than-expected UK inflation figures. In fact, the headline UK CPI jumped above the Bank of England’s target for the first time in almost two years and came in at 2.1% YoY in May. British businesses have returned more than £1bn of furlough cash to the treasury, albeit £300 million of that was claimed in error and it’s still a little short of the £64bn spent by the Treasury under the furlough scheme. The report reinforces consumer confidence and business sentiment is returning throughout the UK.
Sterling has made solid gains against the Euro this morning as it attempts to break the 1.1700 mark, however the Dollar is just below the 1.4000 mark at the open. UK Retail Sales for May are released on Friday morning at 7am.
The Euro is currently losing the battle in holding onto the 1.20 mark against the Dollar as we head into Thursday’s European session. The currency pair dropped to the lowest since mid-April as traders responded to the US Federal Reserve’s bullish performance. However, a lack of major force to back the USD rally afterward seems to portray the currency’s recent sluggish moves.
Given the lack of major data/events and a lapse of the key Fed meeting, Euro traders may lick their wounds and check upcoming data for fresh directions with the Eurozone Consumer Price Index being the next catalyst to watch
Data to watch
13:30 – USD – Philly Fed Manufacturing Index
13:30 – USD – Unemployment Claims