Market Analysis

Federal Reserve expected to communicate the need for patience

The Federal Open Market Committee will meet to decide on U.S interest rates and monetary policy this week, with most market participants expecting that the U.S central bank will communicate the need for continued ‘patience’ towards future rate increases. Market participants will also be listening closely to the FOMC’s latest assessment of the American economy, especially after February’s disappointing job report.

In the second policy meeting of the year for the U.S central bank, Federal Reserve Chair Jerome Powell is expected to stick with his more dovish tone, as he acknowledges ‘muted’ inflation in the U.S economy and growing risks from the ongoing economic slowdown underway in the eurozone and Chinese economy.

Last month’s Non-farm payrolls job report from the U.S economy was weakest in seventeen months, with just 20,000 new jobs created, widely missing the 180,000 headline figure expected. The bright spot inside the report came in the 0.4 per cent rise in average hourly earnings and the tick-down in the official U.S unemployment rate, to 3.8 per cent.

Last week the American economy posted more soft retail sales, inflation and manufacturing data, which is likely to concern FED Chair Powell and FOMC policy members, who have stated on numerous occasions that they are still ‘data dependent’ when deciding on U.S monetary policy and future rate hikes.

The FOMC will also release their summary of economic projections this week, which will include the first set of so-called “dot plots” for this year. The FOMC’s economic projections effectively map policymakers’ predictions for future levels of the federal funds rate. With the recent softer set of data and muted inflationary figures, coupled with U.S Trump’s hard-line towards future rate hikes, the dot plots are widely expected to show lower expectations for future rate hikes, which could be U.S Dollar negative.

The greenback has been losing recent gains against the euro and British pound while finding renewed strength against the yen and antipodean currencies. The euro has been one of the more interesting trades against the U.S Dollar, with the single currency staging a rally from multi-year lows, in spite of declining eurozone data.


EUR/USD Daily Mountain Chart | Source:  ActivTrader


The technical is remarkably clear for the EUR/USD pair at present, buyers are in control in the short-term while price holds above the 1.1290 level, with the 1.1360 and 1.1410 level the foremost upside resistance points. Key support below the 1.1290 level is currently found at the 1.1215 with the multi-year low, at 1.1170, the most prominent support area below.


Written by Nathan Batchelor, External Analyst

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