The US FOMC Meeting today is the main event this week but the outcome is widely expected and priced in already. After a flurry of FED members spoke in the last 2 weeks about raising rates it was all but confirmed by Janet Yellen that the rate hike was coming in the March meeting.
The USD has already had a good run in the last 2 weeks however so the movement will largely come down to the Yellen press conference and the closely scrutinized FED dot plot for clues as to the timing of the next rate hike. Already the FED has suggested 3 hikes this year but with the first one done in March there could be a faster timetable then the market is currently pricing in. This scenario could start the next leg of USD strength.
Alternatively if Yellen comes across patient and emphasis is put on waiting to see the new administrations fiscal policy and its impact on forecasts then we could see the very common buy the rumour sell the fact price action later today. This outcome would lead to EUR/USD rally and USD/JPY selling.
GBP/USD may struggle to keep up with the majors in any relief rally however as Brexit issues remain at the front of traders minds and the timetable for the Article 50 declaration from PM May is push back to the end of the month. She has multiple fronts to fight now with both Scotland and Northern Ireland calling for referendum’s on staying in the UK post Brexit.
AUD/USD has been very subdued but holding nicely above 0.7500 so far as commodity selling slowed and the market stubbornly buys dips. The 200 DMA is at 0.7530 and a break and hold below would be needed to encourage further selling. Thursday’s February employment numbers are the highlight for the week.
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