Ahead of the Federal Reserve’s interest rate decision and press conference this afternoon, the United States Dollar is gaining ground after slipping a bit through yesterday afternoon’s session.
Overview
The Fed’s decision this afternoon is the big risk event on the calendar today, but lots of disparate pieces of news through the evening and night have boosted the Buck before Powell speaks today. President Vladimir Putin of Russia yesterday refused the US’ proposal for a 30-day ceasefire in Ukraine, only agreeing to limits on attacks against Ukrainian infrastructure for the same time period. While in theory, this could be seen as somewhat of a step toward a larger ceasefire, in practice, such an agreement is quite difficult to monitor and isn’t likely to constitute much of an easement of tensions between the two nations.
By contrast for EUR, Germany yesterday achieved the two-thirds coalition majority necessary for its massive spending package focused on debt reform, increased defense spending, and 500 billion Euro of infrastructure spending. The next vote on this package will be Friday in Germany’s upper house of Congress, which should be less of a fight. The greater Eurozone also released final CPI figures for February earlier this morning, showing prices rose slightly less than expected last month. Core prices remained steady on an annualized basis, but such a tick down is good news for the ECB, which has continued to face stagnant-at-best growth prospects through the economic region. Turkish markets were also roiled Tuesday and Wednesday morning following the detention of President Erdogan’s most prominent political rival, raising international concern that political upheaval in the nation could offset Turkey’s recent implementation of economic policies that are more investor-friendly. The Lira reached its worst rate against the Dollar in history, and national stocks plummeted and prompted a trading halt.
The Bank of Japan also held interest rates steady overnight, but markets took the tonality of this decision as fairly dovish after officials cited ongoing concern over the potential economic impact of proposed tariffs from the US. The Fed will no doubt be asked many questions in that vein today, and markets will be combing through the FOMC’s statement as well as Powell’s press conference following the decision for any clues as to voting members’ thoughts on these policies. An updated dot plot is also due out with this decision, any any change to the group’s expectations on further rate cuts this year will likely inject substantial volatility back into FX trading.
What to Watch This Week…
- Bank of England Rate Decision, Thursday
- Monex USA Online is always open
The complete Economic Calendar can be found here.
JPY ⇓
Japanese Yen slid more than half a percent following the Bank of Japan’s dovish interest rate hold overnight and ahead of the Fed’s decision this afternoon. Traders are anticipating some pushback from Powell & co. on the market’s current conviction that the Fed may cut interest rates by 75 basis points this afternoon, giving the Dollar some legs ahead of 2 PM Eastern. Coupled with rhetoric from BoJ officials on concern over the US’s trade policies, JPY is now at its weakest point against USD since the beginning of this month.
EUR⇓
The single currency slid four-tenths of a percent this morning against the Dollar, aligning largely with a global trend of Dollar strength as markets attempt to parse through multiple pieces of news pulling EUR in different directions. The larger trend this morning, though, is settling in a USD-positive direction ahead of the Fed’s decision this afternoon. Markets have shifted from a positive reaction to the news of Germany’s spending bill to a bit of concern about the implementation of such a bill, hedging against the chance that not all the money will be deployed. CPI today also knocked EUR down a touch, though the reading was not substantially below expectations.
