FOMC sparks FX volatility

<p>The FX markets have seen a lift in volatility since the FOMC meeting last Wednesday and intra-day price action is certainly not for the faint-hearted. […]</p>

The FX markets have seen a lift in volatility since the FOMC meeting last Wednesday and intra-day price action is certainly not for the faint-hearted. This scenario is to be expected following the FOMC’s forward guidance that makes any monetary policy adjustments completely data dependant. The US inflation data released yesterday gave the dollar a temporary reprieve with what could be summed up as a ‘not as bad as expected’ outcome. Market participants are even suggesting the data was robust and that the recent pessimism around the US data is nothing more than weather-related that has temporarily disrupted the West Coast ports. The US interest curve is seen as being too negative and the market has overreacted to the FOMC’s ‘dot plot’ interpretation last week, at least according to the US global investments banks. The price action indicates to me that this dollar correction still has some mileage in it as rallies remain anaemic.

The Asian session focused around the NZD and disappointing trade data for February that revealed a surplus of  50 million NZD versus the expectation of  350 million. The detail revealed that exports in dairy products were 25% lower as shipments to China have declined 36% on the year.

Sterling has traded off the benign inflation data lows released yesterday following comments from BoE deputy governor Minouche Shafik, who commented that despite the fall in inflation to zero the next move in rates is still likely to be up.

The market will focus on the volatile Durable Goods release from the US this afternoon, which is likely to remain subdued on the back of adverse weather in February. The market will look for any comments on the situation in Greece as Athens celebrated independence day.

 

 

EUR/USD
Supports
 1.0780-1.0615-1.0580 | Resistance 1.1030-1.1045-1.1470

 

 

USD/JPY
Supports  
119.30-118.65-116.70 | Resistance 120.00-121.55-122.45

 

 

GBP/USD
Supports 1.4830-1.4635-1.4550 | Resistance 1.4990-1.5030-1.5170

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.