Volatility continued throughout the week, USD fell dramatically after FOMC meeting

Central banks remained in focus this week with the FOMC decision proving more dovish than expected, thereby dragging the USD-index close to pre-Nonfarm payroll report levels. After last week saw continued USD strength culminating in 12 year highs above the 100.00 handle, this week the USD come off these elevated levels early in the week amid profit taking, prior to the Fed rate decision. The rate decision itself led to saw a dramatic fall in the USD on Wednesday evening with EUR/USD strengthening by 400 pips as despite removing the key `patient` phrasing the central bank realised dovish projections and heightened expectations of lower rates for longer. However, this move was mostly pared throughout Thursday, before EUR strength on Friday contributed to the weakening of the USD with pair reclaiming the 1.0700 handle amid conciliatory rhetoric from both Greece and the Eurogroup.


Elsewhere, dramatic reactions were noted to other central bank decisions this week, most notably Wednesday saw the Riksbank unexpectedly cut its repo rate to -0.25% from -0.10% and expand their QE programme to SEK 30bln which saw USD/SEK rise to its highest level since March 2009. The central bank also warned of further cuts in the future if required. Whilst at the other end of the spectrum on Thursday the SNB kept rates on hold at -0.75% as expected, however this still saw EUR/CHF weighed on as some participants had been looking for the SNB to cut rates further while the NOK strengthened against EUR by over 2500 pips after the Norges Bank unexpectedly kept rates on hold. Also on Thursday, the BoE saw Haldane’s dovish side as the chief economist and MPC member suggested the BoE has options which include sovereign bond purchases or cutting rates amid downside risks to inflation, before adding that there is no immediate case to alter rates.


Looking ahead to next week, many participants will be looking closely at the host of Fed speakers with the obligatory black out period over. As well as this next week sees plenty of tier one data including European and US PMIs, US Durable goods, UK retail sales and of course Greece will remain in focus for the EUR.​