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US Dollar Rises on FOMC Outlook

The US dollar continues to trend higher almost one day after the most recent FOMC meeting. Policy makers in the US decided to take no action, and were fairly neutral in their statement, but the greenback continues to move higher as this stagnant policy differs from other major central banks taking easier policy action. German inflation and employment data overnight came in slightly below expectations, unable to push the EURUSD rate higher, currently hovering 0.50% above yesterday’s post-FOMC low. This morning, the greenback is being pushed higher still as weekly jobless claims come in below 300k as it seeks to close the week on its highest level in many years. During Asian hours, the RBNZ kept its main interest rate firm at 3.50% but dropped its tightening bias in the statement that followed. The kiwi dollar is now trading at its lowest level since March 2011, accompanied by the Aussie dollar which is trending weaker following a Herald Sun article stating the RBA “will almost certainly cut the OCR rate at its first meeting for the year,” which comes on Tuesday. The USDJPY rate is now pushing lower close to 0.50% as weaker Japanese retail sales numbers have combined with the general dollar outlook this morning. It is not out of the question for this rate to take another look at the psychologically important 120 level in the near future. In Europe today, there was a slew of second and third tier data but it was German inflation and employment numbers that paced the session. Despite coming in below expectations, the reaction by EURUSD has been fairly muted, trading inside a tight range following the volatility the market experienced post-FOMC on Wednesday. European stocks are trading slightly lower and look poised to close today’s session in the red. Following yesterday’s Fed statement, it remains abundantly clear now that EURUSD should continue to trade lower, as each central bank seems to be going in opposite directions with respect to policy in 2015 This morning’s weekly jobless claims have come in much lower at 265k, against expectations of 300k. The US dollar is having no real reaction as the market seems aware these results are more of a result of the MLK holiday week. Next week should remain near these low levels as this week’s blizzard that hit the Northeast should cause more distortion in the numbers. The Canadian dollar has finally broken to psychologically important $1.25 level as commodity currencies sell-off amid general market weakness. Canadian economic data has been limited so far this week, as local November GDP figures close out the month. No reaction is expected as the market will look ahead to next week’s Manufacturing PMI, Ivey PMI, Housing and Employment figures. Tomorrow, the US closes the week out with 4th quarter GDP figures. Currently, the street is anticipating growth around 3.3% for the world’s largest economy in the final quarter of 2014, following 5% growth in Q3. Up to this point, earnings have been strong in the US so there is little doubt tomorrow’s figures should continue to support an expanding US and a strong dollar. The Super Bowl is this Sunday as the New England Patriots take on the Seattle Seahawks, which means Monday will be largely unproductive for a large number of American workers. Although the Seahawks are the defending champion, the Patriots are slightly favored by 1 point. I think we can all agree when I say, Go Pats!


Further reading:

EUR/USD: Trading the Advance US GDP

US jobless claims plunge to 265K – lowest since April 2000