The USD was in crucial danger of being slammed last week after much weaker than expected CPI inflation data. But it was saved by the Fed, which chose to stay the course with its monetary policy normalization, according to the research team at Amplifying Global FX Capital.
“Fed striking an optimistic tone that the recent slump in inflation may be temporary, economic growth would continue on a moderate path and the labor market was already tight and would tighten further.”
“The Fed pushed on with its third hike on a quarterly schedule, the fourth hike in this cycle. And it outlined a plan to wind-down its balance sheet expected to begin this year. It stuck to its forecast of three hikes per year for this year and the next two years.”
“The NY Fed President Dudley reaffirmed the optimistic tone on Monday helping bolster the USD.”
“The USD has been a bit more volatile in June after breaking below the lows just preceding the Trump election in November last year. In the midst of its fall inspired by the weak CPI report, the dollar appeared vulnerable to slumping further to test lows since 2014. However, in the wake of the Fed’s relatively hawkish tone, the dollar may now experience a technical rebound towards downtrend resistance levels.”
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