USD falls after Fed signals no rate hikes in 2020
The US dollar declined while US stocks rose after the Federal Reserve delivered its interest rates decision. The bank left interest rates unchanged at 1.50% to 1.75% and signalled that there will be no rate hike in the coming year. In a statement, Jerome Powell said that the bank will not move on interest rates unless it observed a significant and persistent move in inflation. The inflation rate has remained stubbornly below the Fed estimate of 2.0%. The Fed slashed interest rates three times this year as the US economy saw significant weakness.
The Swiss franc rose against the USD after the dovish Federal Reserve decision. The franc will be in focus today as the Swiss National Bank (SNB) delivers its final rates decision of the year. The bank is expected to leave interest rates unchanged at -0.75%. This will be the 21st meeting that the bank has left interest rates unchanged. The bank will leave rates unchanged despite calls for it to abandon the prolonged period of negative interest rates. In addition, the bank is also expected to keep the overnight lending to commercial banks unchanged at minus 0.75%. It is also expected to continue describing the franc as being overvalued. Many Swiss banks have opposed the negative rates, which squeeze their profits. The Swiss franc has moved sideways this year.
The euro declined against the USD after the Fed decision. Today, the focus will be on the European Central Bank (ECB), which is expected to deliver its rates decision. This will be the first rates decision by Christine Lagarde, who replaced Mario Draghi a month ago. Analysts expect the bank to leave the deposit facility rate at -0.50% and the marginal lending facility at 0.25%. Lagarde inherited a relatively stable situation but one that is facing significant challenges. Even after a prolonged period of negative interest rates and €2.6 trillion of quantitative easing, the economy has remained sluggish. The central bank has also struggled meeting its inflation target of 2.0%.
The EUR/USD pair rose sharply after the FOMC decision. The pair reached a high of 1.1143, which is the highest level since November 4. The price is above the 14-day and 28-day moving averages on the four-hour chart while the RSI has moved above the overbought level of 70. The momentum indicator has moved above 100 while the dots of the Parabolic SAR have moved below the price. There is a possibility that the pair will be a bit volatile as the ECB delivers its decision.
The USD/CHF pair declined after the Fed decision and ahead of the SNB decision later today. The pair is trading at 0.9820, which is the lowest level since September. The price is below the 14-day and 28-day moving averages on the daily chart. The RSI has continued moving lower while the dots of the Parabolic SAR are slightly above the price. The pair may continue moving lower because the SNB does not have enough tools to weaken the franc.
The price of crude oil declined sharply after the EIA released the inventories data. The numbers showed that inventories rose by 822k barrels. This was higher than the consensus estimates of a 2.7 million drop and last week’s drop of more than 4 million barrels. The XBR/USD pair then pared some of those losses and reached the current high of 63.38. The price is along the middle line of the Bollinger Bands while the DeMarker indicator has continued to move lower. The pair may move upwards to retest yesterday’s high of 63.75.