Today’s main event is the long awaited Federal Open Market Committee (FOMC) rate decision. The focus though is not whether the Federal Reserve (FED) will hike rates, as this is almost 100% certain, but on 3 other things. The economic projections, the FOMC statement, and the actual press conference with FED chairwoman Janet Yellen. Also, in the Netherlands, the people will vote in what constitutes the first test of a EU country in 2017 in regards to anti-immigration fears. Far-right leader Geert Wilders is running against Prime Minister Mark Rutte, who has said the election is an opportunity for voters to reject populism.
- GBPUSD staged a sharp reversal this morning after it 2- month lows yesterday, at 1.2110. The pair rebounded this morning to 1.2224 as an article hinted that the Bank of England (BoE) will start hiking interest rates very soon. As the BoE rate decision takes place tomorrow, GBPUSD is likely to be very volatile today.
- EURUSD and USDJPY did not break any recent levels lately, with both pairs showing some signs of further strength against the US dollar. Since the FOMC is tonight though, any action before that is likely to be muted as traders are in a wait and see more.
- The oil price has risen modestly this morning, while US equity markets posted small losses yesterday. Oil prices slumped yesterday yet again to a new 3-month low after the Organization of Petroleum Exporting Countries (OPEC) said that oil inventories continued to rise despite a global deal to cut supply. Crude is still up from about $40 a barrel, a year ago and a 12-year low near $27 which was reached in January 2016.
As for tonight, if the FOMC turns more hawkish regarding the future rate path, for example signaling four hikes this year, general stock market sentiment may worsen and the US dollar will rise further. Fed officials previously projected three rate hikes in 2017, but that might move up to four, amid signs of a recent uptick in inflation and continued strength in the jobs market.
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