Greenback in a holding pattern ahead of the Fed decision
The US dollar was calm today as investors waited for the Federal Reserve interest rates decision, which is due at 19:00 (GMT). The Fed is expected to leave interest rates unchanged at 2.50%. The accompanying monetary policy statement is expected to be dovish, as officials continue to battle with ongoing weakness in the economy. Recent inflation and employment data have shown that the economy is indeed softening. The rates decision will be followed by a press conference by Jerome Powell, where he will discuss the rationale for the rates decision and what’s next. The governor is also likely to be asked about a recent report stating that the White House considered removing him as governor.
The sterling rose today after the inflation numbers were released. The retail price index rose by 3.0% in May. This was higher than the expected 2.9%. On a MoM basis, the RPI increased by 0.3%, higher than the expected 0.2%. The house price index increased by 1.4%, which was higher than the expected 1.1%. At the same time, the PPI input rose by an annualized rate of 1.8%. The headline CPI rose by 2.0%, which is slightly lower than the previous 2.1% while the core CPI rose by 1.7%, higher than the expected 1.6%.
The Canadian dollar strengthened against the USD after impressive inflation numbers. In May, the headline CPI rose by 2.4%, which was higher than April’s 2.0% and the expected 2.1%. On a MoM basis, the headline CPI rose by 0.4%, which was higher than the expected 0.1%. The core CPI rose by an annualized rate of 2.1%, which was almost double the expected 1.2%. The median and trimmed CPI rose by 2.1% and 2.3% respectively.
The USD/CAD pair declined to an intraday low of 1.3336, which was the lowest level since June 14. On the hourly chart, this price was below the 25-day and 50-day moving averages while the RSI dipped below the oversold level of 30. The price is also slightly below the 38.2% Fibonacci Retracement level. While the pair could drop further, later movements will be determined by the Fed statement.
The GBP/USD pair rose today after the inflation numbers from the UK. The pair rose to an intraday high of 1.2600, which was higher than this week’s low of 1.2500. This price is along the upper line of the Bollinger Bands, which is a bullish signal. The RSI has moved from 9 to the current level of 70 while the Accumulation/Distribution indicator has started to move up. The pair is likely to continue moving up, to test the important support of 1.2620.
The EUR/USD pair was relatively unchanged ahead of the important Fed decision. The pair is trading at the important support of 1.1200, which is slightly above the previous low of 1.1180. This price is along the upper line of the Envelopes indicator. It is also along the 38.2% Fibonacci Retracement level. The accumulation/distribution indicator has continued to move lower. The pair is likely to remain in this holding pattern as the Fed delivers its verdict on the economy.