GREENBACK LITTLE CHANGED AS TRADERS WAIT FOR FED
The US dollar was little changed as traders are waiting for the Fed’s interest rate decision, which will come at 18:00 GMT. A press conference will happen 30 minutes afterwards. The Fed is expected to raise interest rates by 25 basis points. This will be the third rate hike this year and the eighth since 2015 when the bank started the gradual tightening policy. Traders will focus on the statement from the Fed and look for four things. First, they will want to know the Fed’s outlook for the economy. It rose by 4.2% in the second quarter and experts believe that it will start slowing down in 2019. Second, they will want to see whether the Fed will remove the part of ‘accommodative’ policy in the statement. This will send a signal that more rate hikes will come. Third, they will want to know whether there will be a rate hike in December and finally, they will want to hear what the Fed’s models are saying about the trade war.
After initially jumping, the kiwi dropped against the US dollar after the trade data was announced and as traders wait for the Reserve Bank of New Zealand’s interest rate decision. The data showed that exports fell in August to N$4.05 billion from the previous month’s N$5.54 billion. Imports remained almost the same at N$5.54 billion as the trade deficit widened slightly. The central bank is expected to leave rates unchanged tomorrow but traders will wait to hear the outlook on future monetary policy.
The United Nations General Assembly (UNGA) continues today after yesterday’s speech by the US president. Today, he will chair the security council meeting where the biggest news will be on Iran. When speaking today, UK’s Theresa May said that her plan for the UK after Brexit will be to make the country the best place for business in the developed countries. She will achieve this by following the US in implementing tax cuts for businesses and individuals. However, there is still a long way for Brexit and this week, signs emerged that the Chequers plan will not be accepted by UK parliament and the EU.
The EUR/USD pair fell slightly as traders waited for the statement from the Fed. It reached an intraday low of 1.1732 but remained at the range it has been in the past few days. It has also been forming an ascending triangle, which is an indication that the buyers are more aggressive than the sellers. After the statement, the triangle pattern will end as the pair moves up or down. A hawkish Fed will take the pair to the support of 1.1657 while a dovish Fed will take it to 1.1800 level.
The GBP/USD pair ended the upward trend on Thursday last week when it declined to the 1.3055 level. Since then, it has been attempting to rise and today, it reached a high of 1.3195. Like the EUR/USD pair, this one has formed an ascending triangle pattern ahead of a speech by Theresa May at the UNGA and the Fed’s rate decision. The key levels to watch will be the 1.3050 and 1.3300 in case of a hawkish and dovish Fed respectively.
The kiwi jumped immediately after the trade data was released. It then started to decline as traders waited for the Fed and the RBNZ decisions on interest rates. It is now trading at the 0.6642 level, which is along the 38.2% Fibonacci Retracement level. Further declines will see it test the 0.65800 level which is also the 50% Fibonacci Retracement level while a dovish statement from the Fed will take it above the 0.6700 level.