USD surges, eurodollar collapses on FED hawkish stance

16 December, 2016

The USD dollar continued its march higher after the FOMC gave no reason to sell the dollar. Moves were sharp, the dollar gained significantly and that led to some historical moves on both currencies and interest rates. 

The EURUSD broke below 1.04 for the first time since 2003 and it looks that the parity is on the way. A clear technical break below 1.0450 (2015 lows) suggests that another leg down is getting started and that a move towards the magic bound at 1.00 is likely.

GBPUSD fell sharply a few minutes after 15:00 GMT as the USD strengtened further. Looking at the H1 chart it’s hard to find any reason for the pair to reverse in the near term.The sharp fall can be attributed to two factors: stronger USD and BOE’s decision. 

Bank of England has announced its decision on the shape of monetary policy: rates are left unchanged, the main one is still at 0.25%. The asset purchase target is still 435 GBP bn and the size of corporate bond QE is still 10 GBP bn. This was all widely expected. All these decisions were unanimous. However, a tone of the minutes suggested that Bank of England is less worried of overshooting the inflation target and that was seen as a dovish signal. 

The UK100 (underlying FTSE 100) has made a move higher in the past hour, with the market breaking above prior resistance at 6980. This could now be seen as possible support. In terms of resistance the all time high at 7090 is now exposed and becomes an important area to keep an eye on as we head into year end.

The Bank of Canada said a housing crash remains the chief risk to the country’s financial system, as dangers from the drop in commodity prices fade and the jump in global borrowing costs since Donald Trump’s election appears to be orderly.

 Looking ahead its an uneventful Asian session in terms of economic releases with Eurozone CPI at 10:00 tomorrow morning the next data point of note. US and Canadian data at 13:30 round off the week with building permits and housing starts in the former expected to fall slightly. 


Source link  
A massive rebound on GBPUSD

Yesterday we observed a massive drop and rebound on GBP, the whole initial decline was erased. As a reminder, yesterday GBP dropped almost by 1% against the USD...

Bearish engulfing on GBP, weaker data

GBPUSD turned lower after yesterday’s bearish engulfing formed within a crucial resistance area, the upper bound of the consolidation at 1.27. There is a chance for a three outside down pattern and a distinct leg lower...

Great start of the year for European manufacturers

According to Markit Data, Eurozone Manufacturing PMI hit 69-month high at start of 2017. The final Eurozone manufacturing PMI came at 55.2 in January with flash reading at 55.1 and the final reading for December at 54.9. The top growth countries were...


DAX took the Trump’s hit

Global Stocks slid Monday after President Donald Trump restricted immigration from seven Muslim-majority nations, a move that underscored the administration’s proposals to erect barriers to foreign trade. That has also taken its toll on the DAX index that ended yesterday’s session more than 1% lower...

A huge disappointment in the UK data

UK retail sales fell most since 2012. We see he fastest pace of decline in almost five years in December. It is due to sales of... pretty much everything from household goods to clothing and food...

China's FX reserves fell

Unsurprisingly, FX reserves in China fell in December. However they stay above the pivotal level of 3tn USD. Yet it is probably a matter of time until the level is broken below as capital outflows are likely to be continued...


Pullback of the dollar

The dollar has lost its shine along with correction of US yields after a strong auction yesterday evening. This sparked a broad negative sentiment towards the US dollar which is still present...

Dollar strenghtens in quiet trading

The post-Christmas trading started quietly with the USD that slightly strenghtens to its major peers. The weakest currency on the fx market is now the Japanese Yen as the USDJPY defended a support at 117.00...

Stay cautious about these reflation trades

We have recently described you a potential reflation trend. The data on price and wage pressures recently released in China and Germany fit the theme of global reflation - consumer and producer prices finally heading north which with time translates to wage pressures...

  


Share: