FOMC proved semi dovish in the FX space - Nordea Markets

Sandeep Kanihama FXStreet Contributor

According to analysts at Nordea Markets, the overall assessment of the FOMC meeting and press conference is semi dovish in the FX space.

Key Quotes

“The Fed (on average) opted against hiking the 2018 outlook in the dot plot, why the market is still almost spot-on aligned to the pricing of three rate hikes this year. If anything the market is actually slightly ahead of the Fed dot plot for 2018, with a little more than 3 hikes priced in overall. This could be the reason why markets react by sending EUR/USD higher.”

“On the other hand the market reacts by sending e.g. 5y1y USD rates higher, even though there is already a correction in markets by the time of writing. Recently markets had also front-runned the possibility of a hike of the so-called R* - the longer-run interest rate in the dot plot. 5y1y rates indicated a big implied probability of a higher longer-run dot plot – and the Fed has partially taken account of that by hiking the 2020 and long-term perspectives on average for the Fed funds rate in the dot plot. Hence, the FOMC partially acknowledges the higher probability of a higher policy rate in the US, which is already priced in by markets.”

“The hike of the long-end of the FOMC dot plot should underpin the USD rather than the opposite over the coming weeks, as it should re-steepen the USD curve a little - Something that the USD needs to regain its footing. We still judge that it is too early to expect a substantially more hawkish pricing of the Fed – and hence also substantially higher USD interest rates, as the short positioning in the USD bond market is already very stretched.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD bears Flirt with 61.8% Fibo. support near 1.1775 area

The EUR/USD pair extends the previous day's late pullback from the 1.1835 region and attracts some follow-through selling during the Asian session on Tuesday. Spot prices currently trade around the 1.1775-1.1770 area, down nearly 0.15% for the day amid a modest US Dollar strength.

GBP/USD holds losses below 1.3500 due to BoE rate cut bets

GBP/USD edges lower after two days of gains, trading around 1.3480 during the Asian hours on Tuesday. The pair declines as the US Dollar rebounds from losses recorded over the previous two sessions. Traders will focus on the US ADP Employment Change four-week average later in the day, along with speeches from Federal Reserve officials.

Gold down but not out as key $5,140 support holds

Gold consolidates the advance to monthly top of $5,250 in Tuesday’s Asian trades. The US Dollar finds demand as liquidity returns and risk sentiment recovers, despite US tariffs uncertainty. Gold defends 61.8% Fibo resistance at $5,142 amid the pullback, daily RSI remains bullish.

Dogecoin, Shiba Inu, and Pepe extend losses on bearish signals

Meme coins are facing renewed selling pressure amid fading broad risk-on sentiment so far this week, with Dogecoin, Shiba Inu, and Pepe extending their losses after recent corrections.

Supreme Court nixes tariffs, Trump teases 15% global tariff

On February 20th, the Supreme Court ruled that Trump’s global tariffs under IEEPA authority were unconstitutional, effectively nullifying the framework. However, the relief was short-lived. Within hours, Trump floated a 15% blanket tariff under an alternative legal authority.

XRP recovers slightly as bearish sentiment dominates crypto market

Ripple is rising above $1.40 at the time of writing on Monday amid fresh tariff-triggered headwinds in the broader cryptocurrency market. The sell-off to $1.33, the token’s intraday low, can be attributed to macroeconomic uncertainty, geopolitical tensions and risk-averse sentiment among other factors.