The Fed kept the federal funds rate on hold in the range of 0% to 0.25%. Eleven members voted to maintain monetary policy. Monthly bond purchases remained at $80 bln per month, and mortgage securities at $40 bln per month. Fed officials believe that the first rate hike will take place in 2022. Six officials expect one rate hike in 2022, and three expect two rate hikes in 2022. The FOMC also raised its 2022 inflation forecast to 2.2% from 2.1%.
Fed Chair Jerome Powell stated that “a gradual tapering process that concludes around the middle of next year is likely to be appropriate," adding that this does not mean a rate hike would follow immediately.
Today’s macro agenda (GMT 3)
- From 10:30 to 11:30 flash manufacturing and services PMIs (September) are due out in Germany, the Eurozone, and the UK
- 13:00 UK: CBI distributive trades (September)
- 14:00 UK: BoE rate decision and quantitative easing
- 15:30 US: initial weekly jobless claims; Canada: retail sales (July)
- 16:45 US: flash manufacturing and services PMIs (September), 17:00 CB leading index (August)
The single currency recovered to 1.1716 during APAC trading. Demand for risk-sensitive assets rose on news from China. The Chairman of Evergrande said that the company will its utmost to settle debts with investors and customers. The company's shares surged momentarily by 38% to HK$ 3. The company is set to pay interest due on a dollar-denominated bond today.
Today FX players will turn their attention to a Bank of England meeting. Sterling is faring worse against the dollar than the euro due to gains in the EURGBP cross. No policy change is expected to be made at the meeting. The focus will be on the tone of the statement.
By the time of writing, the euro was up 0.21%. Bearish sentiment persists in the market. To turn around the downward trend, buyers will need to close today’s session above 1.1760. A positive news flow is necessary to reach 1.1760. It would allow buyers to breach two interim resistance levels: 1.1723 and 1.1738.
Key support is located at 1.1620. As long as price action holds above 1.1600, buyers from the higher TFs will be in control of the market. Now a double bottom has shaped up on the daily TF. If the Chinese developer pays interest on its bond, there is every reason to expect a rebound to the vicinity of 1.1812.
FX participants should also bear in mind that monthly and quarterly candles will be closed in five trading days. The scales are tipped towards sell-side bias, so September should close above 1.1800. We expect heightened market volatility at 11:00 GMT today.