Fed appears concerned about the global economy, Dollar's outlook bearish

General market theme
Dollar’s weakness and inability to capitalize on the other majors’ lack of support has been the theme in the markets during the current month and that was made even more obvious yesterday after the release of the Fed press statement on the back of their meeting on monetary policy. The US policymakers appeared considerably less bullish and clearly concerned about the volatility in the global markets and the drop in oil prices turning the Dollar’s outlook even more bearish.

Price action highlights
The other major currencies benefited from this development and the Euro managed to rally to the 1.0900 area twice, before and after the release of the press statement. The fact that the Single currency couldn’t overcome the 1.0900 barrier though tells us another thing as well: with the ECB prepared to ease further if needed the Single European currency cannot benefit from Dollar’s weakness either. This should lead to further volatility and lack of follow-through between the 1.0780 and 1.0900 levels.

The Cable was on the defensive yesterday and failed to capitalize on Dollar’s lack of confidence and the reason behind it is pretty simple: investors believe that if the Fed is turning more bearish and could consider a less aggressive interest rate hiking schedule that could mean that the BoE could forget about hiking rates altogether in 2016. The UK currency remains bearish in its outlook and all rallies higher should be considered a selling opportunity at this time.

Focus of the day
Today our focus will be spread across the 3 main currencies: early in the morning the release of the UK GDP levels is expected to print in a bearish manner and that could take its toll on the under-pressure Pound and later around midday the German inflation levels will also play a role in dictating price action. A higher reading could push the Euro higher but it will take some serious momentum to overcome the 1.0900 barrier. Finally the US Durable Goods Orders report is also pending for release and with analysts expecting a lower reading this could be another reason for the Dollar to remain weak.