The FOMC Statement offered little in the way of surprises yesterday, but did go out-of-the-way to say that interest rates will maintain its current target range. The language of the report is always open to interpretation and while the Fed certainly did not acknowledge outright recent lacklustre data from the States, it did use words like ‘closely monitor information on economic and financial developments in coming months……….’. While that is not an admission that all is not wine and roses, it does give the Fed an out if and when they are forced to admit that GDP will not match current expectations.
The EUR is trading stronger since the FOMC Statement and press conference and global bourses have done well. Cheap money continues to have an allure for investors particularly when they view the equity market as a safer avenue for risk – right or wrong.
Gold has traded slightly stronger too, but has not sky rocketed in value and it will not likely do this. The precious metal is near 1277.00 USD as of this morning. Part of Digital Markets Advisor’s reasoning for this is the fact that inflation remains mute and this was even pointed out in the FOMC Statement yesterday. Inflation is a key factor frequently regarding speculation among Gold and other commodities.
Retail Sales figures will come from the U.K. shortly. The U.S. will release the Philly Fed Manufacturing Index and the weekly Unemployment Claims numbers later today. There will not be tons of other data for investors to chew on today or tomorrow leaving existing sentiment as the biggest factor.
Trading within the FX markets will likely be based on psychology today and tomorrow. The USD has been stronger against the EUR the past couple of weeks, but can this be maintained? The ECB and European Union as a whole would like the Single Currency to be weaker, but the EUR might not be able to maintain lower values while the Fed shows no signs of raising interest rates in the States and thus keeps the most significant of world currencies for the foreseeable future ‘cheap’.
On the other hand, GBP traders who have ridden its strong trend will have to decide if Sterling can continue its ride and where resistance may come into play.