Kantox currency update: US dollar eases despite Fed’s hawkish hike
The widely awaited interest rate hike by the Federal Reserve was welcomed with an initial US dollar rally but the enthusiasm was short lived. The greenback quickly turned lower as the market shifted the focus to the ECB’s monetary policy decision, due later today.
The Fed hiked rates from 1.75% to 2% and hinted to four hikes this year- instead of the three hikes initially scheduled-. However, the global trade tensions and especially the deterioration of the relations with China have cast some shadow over the bright economic outlook of US economy.
Today, all eyes will be on the European Central Bank, which is expected to signal the exit of its QE program, according to market speculation, probably in December. This would mark the end of the expansionary cycle started in 2015 and might have a significant mid-term impact on the euro.
EUR/USD: bounces up to 1.1800. The euro dropped to 1.1740 lows immediately after Fed’s meeting before bouncing up again and retrace previous losses to return beyond 1.1800. As at London market opening times, the EUR/USD is trading at 1.1810.
GBP/USD picks up from 1.3300 area. The pound dove to 1.3310 lows in the aftermath of Fed’s monetary policy decision, where the pair found support to bounce up and return to 1.3400 level. As at London market opening times, the GBP/USD is trading at 1.3400.
USD/JPY pulls back from 110.80 highs. The dollar hit three-week highs on after the Fed’s rate hike, but it lost steam shortly afterwards and has pulled back to 110.00 area on Thursday’s early trading. As at London market opening times, the USD/JPY is trading at 110.05.
In the Calendar Today
The main event today will be the ECB’s monetary policy decision. The market expects the bank to signal the end of the bonds purchasing program, which might have a positive impact on the euro.
In the US, May’s retail sales are expected to show a slight increase in May. Consumption is an important contributor to the US GDP and therefore, strong retail sales figures tend to be dollar supportive
11:45 GMT ECB: Monetary Policy Decision
Previous: 0% Expected: 0%
12:30 GMT ECB: Press Conference
12:30 GMT US: Retail sales (MoM) (May)
Previous: 0.3% Expected: 0.4%