Article / 13 December 2017 at 22:13 GMT

US Wrap: Fed decks the dollar with dovish rate hike

FX Trade Strategist /
  • FOMC raises rates and leaves 2018 rate forecast unchanged 
  • Gold soars and oil sinks 
  • The Bank of England and European Central Bank meetings are due

By Michael O'Neill

NY Focus: The US dollar opened close to flat. Traders were eyeing the Federal Open Market Committee meeting later in the day but focused on November inflation data. Headline CPI was unchanged but the dip in CPI ex-Food and Energy to 0.1% from 0.2% in October triggered US dollar selling.  

The losses were minimal until the FOMC statement was released. The Fed raised rates by 0.25% to 1.25-1.5%, with two dissenting. The outcome was expected. What wasn’t priced in was the unchanged dot-plot forecasts. The FOMC predicts three more rate increases in 2018 just as they did in the September Summary of Projection.

EURUSD rallied from 1.1730 to 1.1830 and ended the day near the top. Sterling climbed from 1.3320 to 1.3429. UK Prime Minister Theresa May’s government lost a vote resulting in an amendment that gave MPs more say over the final Brexit deal.

USDJPY tanked, falling from 113.36 to 112.51 due to both the weak inflation data and the dovish rate hike.

Traders took a shine to gold, finding the prospect of low rates for longer appealing. XAUUSD rose from $1,240.54 to $1,256.96.

Oil bulls did not have a good day. The Energy Information Administration reported a 5.11 million drop in US crude inventories. However, traders keyed in on the 5.7 million barrel jump in gasoline stocks. WTI tumbled from $57.80 to $56.57.

 Decked ... the US dollar weakened after the Fed hiked interest rates by 0.25% in a widely expected move, but left its rate outlook for the coming years unchanged. Photo: Shutterstock

Thursday Focus: Take your pick. The Bank of England and European Central Bank meetings are due. The ECB could give EURUSD bulls an early Christmas present if ECB President Mario Draghi is the least bit hawkish. The Bank of England meeting could be a dud due to the lingering Brexit issues.

EURUSD may be poised to retest the 1.1930 area thanks to today’s drop in the USDX below support at 93.50 and the EURUSD break of resistance at 1.1810.

EURUSD 4 hour
Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more 

– Edited by Gayle Bryant

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.
Txs for update:-) ... and I want to add, that Dow manipulations has got so obvious that I can document it with the Screen dump from the Street.I have observed it the whole day and wondered why there was such a big difference between the rise in Dow and the impact on Dow of the accumulated price change of the stocks.Sometimes it was over +100 points difference...... Otherwise they are used to do J hook rise in the last 2-5 minutes before the closing....permanently in the last 13 month
actually Dow should close with minus 6 points today, according to the stocks
djustoe djustoe
All the major indices are being manipulated by the various central banks around the world. Its not something ever given mainstream media attention though.


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