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EUR/USD jumps above 1.1200 after FED decision

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Mar 16, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    EUR/USD jumped from below 1.1100 and climbed reaching levels on top fo 1.1200 boosted by a decline of the US dollar across the board. Greenback weakened after the US central bank decided to leave rates unchanged and also after the FOMC staff projections now show two rate hikes during 2016 instead of four. The new FOMC staff projections are more in line with market expectations.

    The pair reached 1.1211 and is trading near the top slightly below last week highs (1.1217). According to analysts from Brown Brothers Harriman, the euro held support we identified near the breakout from the ECB meeting in the 1.1040-60 area. “It has now moved to almost 1.1190. We have suggested that provided the breakout holds, the euro can move back toward 1.1300.”

    Before the FOCM decision, the pair was trading at 1.1080 and then jumped more than a hundred pips and it was consolidating strong gains during Janet Yellen press conference. A daily close around current levels would be the strongest in a month.

    FED pulls back

    James Knightley, from ING, noted that the particularity of today’s meeting was the hawkishness tempered by the Fed’s median projections showing a reduction in projections for rate hikes from four this year to just two. He mentions also that there were also cuts to the near-term growth (2.2% from 2.4%) and inflation forecasts (1.2 from 1.6% on headline PCE).

    “Overall it suggests that the Fed remains cautiously upbeat on the prospects for the economy and expects to continue on the tightening path, but not until it is more confident that rate hikes are needed. The data flow will determine the path and in this regard our house view remains that there will be just one hike this year. Most probably in 3Q16”, said Knightley.
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