Analytical review from AcademyFX

Analytical review from AcademyFX

Analytical review from AcademyFX

This week, the key events were the fed meeting, the publication of the minutes of the meeting and Janet Yellen's speech. As a result, the interest rate on the us dollar was raised by 25 basis points.

The rate hike itself was already factored into the price, and all we saw after the fed's decision was a weakening dollar. Although this may not seem logical, you need to understand that the rate increase for the market became obvious on February 28. When William Dudley (one of the most authoritative members of the FOMC) said that at the moment there are better conditions for raising the rate. And all subsequent growth took place with the expectation of an increase in the interest rate.


At the meeting itself, Janet Yellen's speech was the driver of the decline. The fed planned 3 rate hikes over the course of the year: in June, September, and December. A rate hike in March suggests that the remaining increases will be in June and September. And December becomes a free period, which makes a fourth rate increase possible. But Yellen said that the fed's plans remain 3 rate hikes and that they do not fully understand how trump's policies will affect the economy. Against this background, Yellen's rhetoric was quite soft, so the dollar weakened against almost all currency instruments.

Overall, the dollar remains one of the strongest instruments relative to other currencies this year. Since it is obvious that monetary policy is tightening, while for the rest this option is still questionable.

The fed has forecast that at the end of 2017, unemployment should be equal to 4.5% and inflation should approach 1.9%. If there are no such figures at the end of the year, monetary policy will soften or, at least, its tightening will slow down.

The next interesting news was the publication of the minutes of the meeting of the British monetary policy Committee. The data in the minutes suggested more that monetary policy is more likely to tighten in the near future than stimulus programs will be implemented. A number of Committee members believe that an increase in the interest rate will be necessary. One of the members voted to raise the interest rate now. This was a surprise for the market, which was reflected in the chart, and the growth continues to this day.



It is unlikely that policy tightening will take place before the formal initiation of the brexit procedure. Most likely, the Central Bank of great Britain will observe how this will affect the economy, and then a decision on monetary policy will be made.

One of the important events in the near future is the G20 meeting, which starts today and will be held on Saturday and Sunday. It will also be attended by the heads of Central banks, who will give forecasts for the development of their economies. This will need to be closely monitored, especially by Draghi and ECB officials. If their data is similar to the last ECB meeting, this may be a good point in the short.

Next week will be more calm in terms of major currencies. More volatile news is expected for the Australian and new Zealand dollars with the minutes of the Australian monetary policy meeting and the New Zealand interest rate decision.

The situation will be clearer and a more detailed overview can be made next week after the G20 summit.

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