- Federal Reserve raises rates by 25bp to 1.25-1.50% as expected.
- Projects three rate hikes in 2018.
- US Dollar tumbles after the decision.
The US Dollar dropped sharply after the FOMC decision to raise rates and it continued to slide during Yellen’s press conference. Equity prices remained near the top while US bond yields moved to the downside. Gold jumped, rising above $1,255/oz
The DXY fell from 94.00 to 93.60 initially and then broke below 93.50. It was last seen at 1-week lows at 93.37, holding a bearish tone. The index was retreating from a critical resistance area around 94.10/15. It was having the worst performance since mid-November.
USD down across the board after Fed
The Fed decided to raise rates by 25bp to 1.25-1.50%. Two FOMC members (Evans and Kashkari) voted against the decision to tighten. According to the updated projections, the median forecast shows three hikes during 2018 and two more in 2019. “The accompanying statement suggests the FOMC is increasingly upbeat on the growth prospects, pointing out that the labour market “remains strong” while removing some of the more hesitant language previously used. This can also be seen in their upward revisions to the near-term growth forecast for 2018”, said James Knightley, Senior Economist at ING.
Yellen’s press conference is on its way. “We believe 'surprising' softness in inflation related to transient factors”, said Yellen during her last post-meeting press conference. According to her, incoming data suggest that there are only modest upward pressure on wages.
DXY Levels to watch
To the downside, immediate support is seen at 93.35 (20-SMA) followed by 93.15/20 (Nov 24 high) and 93.05. On the upside, resistance might now be seen 93.75, 93.95 and 94.10/15 (weekly high / downtrend line from March).
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