Fed & BOE Keep Rates on Hold As Inflation Remains Weak

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US Dollar Up

Over the European morning on Thursday, the US dollar strengthened once again. It continued its rally from yesterday in response to the FOMC meeting which saw the Fed keeping rates on hold. The bank cited subdued inflation as the key driver for keeping policy at the current level. However, it did acknowledge a “solid” rise in economic activity which has fuelled USD buying, bringing the index back up to 97.39 last.

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EUR Stays Firm

EURUSD has been a little higher against USD today. This comes despite USD strength as the market recovers some of yesterday’s losses which saw price trading back down towards the 1.1175 level. Eurozone PMI data sets this morning from France and Germany came in mixed. However, EUR has seen some buying. This is due to stronger than expected eurozone manufacturing PMI, despite the reading still being on the contractionary territory.

BOE Keeps Rates on Hold

GBPUSD has traded a little lower against USD today. The BOE kept rates on hold once again citing Brexit uncertainty as the main obstacle to raising rates.  The bank noted that inflation continues to run just below target. However, again, the BOE forecasts that if the economy develops in line with its projections, further tightening in monetary policy will be necessary. Though this, of course, depends on the outcome of Brexit.  Despite the decline, GBPUSD remains above the 1.30 level keeping focus on further upside for now.

Rally in Risk

Risk sentiment is staging a recovery today following the weakening seen yesterday in response to the FOMC meeting which sparked USD buying. With optimism around a potential US/China trade deal continuing to keep equities supported, the current dip below the 2939.87 level is likely to provide a good buying opportunity for bulls looking to reload positions.

Safe Havens Down

The recovery in risk sentiment today, along with a firmer US dollar, has weighed on the safe havens with both JPY and gold down against USD. XAUUSD is moving back towards the 1266.54 level support as the prospect of Fed rate hikes later in the year re-emerges. USDJPY has turned higher today also, trading 111.48 last as price failed to test the 110.86 support, putting focus on a move back up to 112.12.

Crude Capped By Bearish EIA Report

Oil prices have been lower again today over the European morning following the latest weekly EIA report. The report yesterday showed a large, unexpected increase in US crude stocks. US inventories rose by 9.9 million barrels last week which, along with record high US crude production, is keeping price weighted. Crude is now trading below the rising trendline from last year’s lows. However, for now, it’s still above the 61.89 level support.

Commodity Currencies Recovering Against USD

Despite the weakness in oil prices and the strength in USD today, USDCAD has traded lower with price retreating further following yesterday’s test of the 1.3467 level resistance. Canadian manufacturing data yesterday came in weaker than expected with the sector still below the neutral level on the PMI index.

The Australian dollar is slightly higher too against USD today despite the stronger US dollar. Optimism around a US/China trade deal materializing in the coming weeks is keeping risk sentiment buoyant. AUDUSD is now fighting to stay above the .7021 level which it is currently challenging.

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