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FOMC day finally arrives

Posted on: March 15, 2017

Congratulations! You have made it to another FOMC decision day. Despite the fact that the “will they or won’t they” has all but been decided with the market pricing in a 100% chance of a US rate hike today, that does not mean there won’t be some fireworks. Participants will be focused on the language of the statement, and “the dot plot”, which shows expectations for future interest rate moves. There is a small chance that the dot plot may move from 3 hikes in 2017 to 4, which would be very hawkish. It is more likely however that any change in the plot would come in 2018 or 2019, and a rise there should also spark USD buying. Because of the tilt towards hawkish expectations, it is possible that anything neutral will be interpreted as dovish and we could see further USD selling on top of what we have seen this morning. And of course, anything dovish could let the air out of the USD balloon very quickly.

Overnight not much to report as the market saw broad USD weakness as participants square positions ahead of the Fed. UK employment data came out better than expected which saw GBPUSD pop before the move was faded. This morning the polls also open for the Dutch election, which sees Mark Rutte take on the far-right candidate Geert Wilders.

For those watching USDCAD, yesterday the currency pair was at the mercy of OPECs headline seeking. We saw strong buying before selling interest stepped in around 1.3490/1.3500. Expect to see lots of sellers ahead of 1.3500 and again ahead of 1.3535. However if the Fed is hawkish we could blow right through these levels in pursuit of the double top at 1.3600. Support comes in around 1.3440 and again around 1.3375.

  • Yesterday’s NA Range 1.3456 – 1.3495
  • Asia Overnight Range 1.3457– 1.3485
  • London Overnight Range 1.3443 – 1.3465

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