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Initial Greenback Weakness Reverses As Fed 2024 Dots Rise

FOREX
  • Price action before the FOMC rate decision saw the greenback edging lower, with the USD index declining around 0.45%, largely taking its cues from lower US yields and slightly firmer major equity benchmarks.
  • However, a hawkish hold from the FED saw US yields spike higher and the associated greenback strength prompted the USD index to trade back into positive territory. The major standout of course was the substantial rise in the 2024 year-end fed funds rate median to 5.1% which was not expected by any of the analyst previews seen by MNI.
  • Despite Chair Powell reiterating his Jackson Hole rhetoric regarding the Fed proceeding cautiously, the USD is holding near session bests as we approach the APAC crossover.
  • USDJPY has risen back above 148.00 and will focus on the overnight highs of 148.17 before 148.40, the Nov 4 2022 high. In similar vein, EURUSD maintains its bearish tone and the recent breach of 1.0686, the Sep 7 low, confirmed a resumption of the downtrend. Moving average studies are in a bear mode position, highlighting current sentiment with sights on 1.0611, a Fibonacci retracement.
  • Additionally, cable has resumed the softer price action which had categorised early Wednesday trade following the below-expectation CPI data. Some sell-side analysts have adjusted their rate calls to a hold for tomorrow’s Bank of England decision, which highlights the significance of tomorrow’s outcome. 1.2308, the May 25 low, represents the key support
  • Elsewhere, we also have central bank decisions for Sweden, Switzerland and Norway. On the data front, New Zealand GDP, US Philly Fed, Jobless Claims and Existing Home Sales highlight the docket.
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