USD Reeling after Fed’s Dovish Hike; GBP a Buy on Dips around BOE

Talking Points:

– DXY Index pushes to lowest turn given Feb 20 after a initial FOMC assembly helmed by Fed Chair Jerome Powell.

– No pierce approaching today, though BOE assembly should keep traders’ courtesy tuned in to a 25-bps travel during a May meeting.

– See a full DailyFX Webinar Calendar for arriving plan sessions.

Looking for longer-term forecasts on a US Dollar and a British Pound? Check out a DailyFX Trading Guides.

US Dollar Finds No Relief in Powell’s First Press Conference

The US Dollar (via a DXY Index) fell to a lowest turn given Feb 20 after a initial FOMC assembly helmed by Fed Chair Jerome Powell. The FOMC summarized a trail for 3 sum rate hikes in 2018 – as a marketplace was pricing in forward of time – and a depot rate for 2020 entrance in during 3.4% contra 3.1% previously.

Whatever hawkish disposition was pragmatic seems to have been overshadowed by marketplace participants’ concerns that a US economy is in a late stages of a business cycle. Equity markets nearby all-time highs, rising inflation, rising seductiveness rates, weakening housing data, and assinine pro-cyclical mercantile process – rising deficits and sum debt – are all revealing signs of an modernized economy impending a finish of a expansion cycle.

Accordingly, with these overarching concerns being protracted by a awaiting of a trade war, a US Dollar found no service in Fed Chair Powell’s initial press conference. For now, it’s still suitable to proceed a DXY Index with a neutral bias, nonetheless we’re removing tighten to switching behind to an undisguised ‘bearish’ one given cost movement in EUR/USD, GBP/USD, and USD/JPY (see a above video).

Expectations for a Bank of England Meeting

The Mar process assembly will see Bank of England take a likewise ease proceed as final month. While policymakers expelled an updated Quarterly Inflation Report, a categorical overnight seductiveness rate was hold in check during 0.50%. Accordingly, but pithy forecasts due this time around, no process measures are approaching to change.

For now, with Brexit doubt clearly anticipating clarity after a EU-UK transition understanding was reached, and that acceleration stays stubbornly above +2% y/y, a doorway is open for a BOE to order another rate travel when their subsequent QIR is expelled in May. The denunciation surrounding a BOE’s process matter currently should infer understanding for a British Pound as a 25-bps travel is queued up. Join me currently during 7:45 EDT/11:45 GMT for live coverage of a BOE rate decision.

Price Chart 1: GBP/USD Daily Timeframe (July 2017 to Mar 2018)

USD Reeling after Fed's Dovish Hike; GBP a Buy on Dips around BOE

The outcome surrounding today’s BOE assembly leaves a British Pound in a ‘buy a dip’ situation. GBP/USD (as seen above) continues to trade within a uptrend from a Nov and Dec 2017 and Janaury 2018 lows, while a converging seen from mid-January to mid-March appears to have taken a form of a bullish pennant.

As such, with GBP/USD trade above a daily 8-, 13-, and 21-EMA envelope, and both MACD and Slow Stochastics trending aloft in bullish territory, we’re looking for GBP/USD to lapse to a 2018 high nearby 1.4346 over a entrance sessions.

Similarly, EUR/GBP stays on lane to exam a new lows nearby 0.8690, and it would mount to reason that, given a forward channel in place given Sep 2017, a deeper pullback to channel support nearby 0.8660 could be eyd over a entrance sessions.

See a above video for technical considerations in a DXY Index, EUR/USD, USD/JPY, GBP/USD, EUR/GBP, and GBP/AUD.

Read more: US Dollar Whipsaws Around Mar FOMC Decision – No Direction


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— Written by Christopher Vecchio, CFA, Senior Currency Strategist

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