The Federal Reserve delivered a slightly hawkish rate hike with Fed officials expecting three quarter-point rate increases in 2017, up from the two seen in previous forecasts. The Fed’s projections for growth, unemployment and inflation over the next three years were largely unchanged from September. With regard to fiscal policy the FOMC statement did not include language referring to changes in fiscal policy. When asked about how Trump’s fiscal policy plans influenced the Fed’s forecasts and could affect future decisions, Yellen said it was too early to judge how fiscal policy would affect Fed policy.
All in all, yesterday’s FOMC statement had a positive impact on the U.S. dollar even if the risk of a pullback in the greenback persists.
EUR/USD: After having tested the 1.0470/60-support we may see some corrections before year-end. It might be tempting to sell the pair in case of a break of 1.0460 but traders should be careful as liquidity traditionally dries out before the Christmas holiday season.
Yesterday’s trading has been somewhat challenging especially for traders who have not had a proper risk management during the day. An appropriate risk-management is therefore essential for the long-term success.
GBP/USD: The cable broke below its recent upward trend channel but it was able to hold above 1.25.
Today’ focus shifts to the Bank of England and its monetary policy announcement at 12:00 UTC. We prepare for volatile swings in the GBP/USD and hope for some profitable movements. No changes are expected but it will be the central bank’s rhetoric which should have a major impact on the pound.
From the U.S. we have the Consumer Price report scheduled for release at 13:30 UTC, which could affect the price action in the greenback.
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