Dollar Stalls On Mixed Messages From Fed
Fed Holds Rates Steady in March
The US Dollar is starting the day on a softer footing following a fresh push higher yesterday as traders reacted to the lates Fed rate decision. The bank held rates unchanged, as expected, and maintained its view that a rate cut this year is still expected. The updated dot plot projections retained a signalled cut this year. However, the general consensus among members had shifted in favour of just one cut over the coming year, down from two previously. This view was explained by the update summary of economic projections which shows the Fed expecting higher inflation and growth over the year.
Powell Muted on Iran War
Aswell as the updated dot plot and economic forecasts, traders were waiting for the post-meeting presser to hear how Powell would address the risks from the Iran war. On this matter, however, Powell remained guarded simply saying that while there is plenty of uncertainty in the outlook, the Fed feels that the energy price shock should prove to be short-lived rather than something more entrenched. Along with its view that inflationary pressures from energy moves will prove transitory, Powell was also keen to warn of residual labour market risks which need to be managed. With some mixed messages in the meeting and lack of detail from Powell, the Iran war should remain the key driver for USD with the Dollar to continue to track oil flows near-term.
Technical Views
Dollar
For now, the index remains capped by the 100.36 mid-2025 highs following the bullish channel break. While price holds above 99.15, focus is on a continuation higher and a move up towards the 101.91 level next. If we break lower, 98.24 will be the key support to watch, along with a retest of the broken channel.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 73% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.