Fed Projects NO Rate Hikes This Year
USD weakness headlined the forex landscape over the European morning on Thursday. The greenback continued to slide following yesterday’s FOMC monetary policy meeting. The meeting saw the Fed reaffirming its decision to keep rates on hold for now. The bank noted that despite solid labor market conditions, economic growth has slowed over the first part of the year, reflecting a weaker dollar abroad.
Hence, FOMC members projected no more hikes in 2019. The Fed also mentioned that inflation has declined, meaning that the current policy rate is appropriate. Meanwhile, it once again highlighted its wait-and-see approach to incoming data. The USD index has now broken down below the 95.72 February low on the back of the meeting but is trading 0.50% higher in Thursday’s session.
ECB Economic Bulleting Reaffirms Inflation Issues
Despite USD weakness, EURUSD retraced this morning. The ECB’s economic bulletin highlighted the ongoing issues with subdued inflation and the sizeable moderation in growth which continues to hamper its goal of 2% inflation. EURUSD is now back below the 1.1400 psychological level following a false break yesterday. The currency pair had reached a 6-week high following a dovish Fed, at $1.1450.
SNB Cuts Inflation Forecasts
At its monetary policy meeting today, the SNB also kept rates on hold. However, it struck a more dovish tone in its policy statement. The central bank revised its inflation forecast lower in line with the general tide of dovishness seeping G10 central banks. The SNB noted soft economic data and an overvalued franc as among the issues facing the economy. This led to USDCHF climbing back above the key 0.9926 support. The Swiss franc had been somewhat firm ahead of the announcement, but prices saw a rejection at the 0.9900 barrier.
GBP Takes Breather After BOE
GBP remains weak following the BOE’s rates meeting. Despite retail sales rising more than expected in February, the anticipation of only a short Brexit extension means that the BOE’s hands are likely to remain tied when it comes to rates. With this in mind, the BOE did not provide any hawkish signals today. However, the acknowledgment of recent strong data sets could see GBPUSD challenging the 1.3150 level resistance again. The British pound is down ~0.50% for the day, uniformly to the US Index gains.
Safe-Haven Gold and Yen Rise
The sell-off in USD today has been good news for safe haven assets with both gold and the Japanese Yen benefiting. Gold has traded near highs of 1320.08 today, as it heads back towards last week’s highs. Meanwhile, USDJPY has broken below the 110.75 support. Although JPY upside had been capped by the bearish bias left over from last week’s BOJ meeting where the bank reaffirmed its commitment to negative rates, Yen bulls are having another go at pushing prices lower. USDJPY rejected the 110.36 support, however, new positions weigh down on the exchange rate.
Equities Under pressure Amidst Google Fine and Boeing Investigation
Despite the sell-off in the US Dollar, equities have come under pressure over the last 24 hours with the SPX500 trading back under the 2818.07 level. In Europe, GER30 is down over the last 24 hours also, falling below the 11697.1 level. This comes as the market responds to news that European regulators have hit Google with a 1.5 billion EUR fine regarding abuses related to its dominant position in online search advertising. News of the fine along with reports of the investigation into Boeing airline inventory has taken a toll on risk appetite heading into the end of the week.