The US Federal Reserve Crashed the USD, but It Was Bought Out (Weekly Review)

Last week investors’ attention was riveted to such important events as the meeting of the Federal Open Market Committee and fairly upsetting and threadbare news of the upcoming UK exit from the European Union. The Fed, in full accordance with the forecasts, did not raise the interest rate, while practically declaring the end of the monetary policy tightening cycle.

The reaction of the market was a very large-scale sale of the US dollar, which collapsed against many of its competitors. However, along with the threat of a “tough” Brexit and the slowdown of the Eurozone economy, the growth of the British pound and euro against the USD was used for sales. After the release of weak macroeconomic indicators in Germany and the Eurozone, the single currency position only deteriorated, and it ended the week with a fall against the dollar, which, in turn, worsened its technical prospects.

Despite the continuing uncertainties regarding the prospects for Brexit, the pound still managed to win back most of the losses incurred in the pair with the dollar. The postponement of the UK’s termination date for EU membership gave another hope for a deal between London and Brussels, but the position of Premier Theresa May shattered again, and the risks of her resignation increased again. In addition, the UK received only a month of postponement, and then, provided that the parliament votes for a deal option pushed by Mei, which is generally unlikely, therefore, in the absence of positive news, the pound will remain in a vulnerable position.

Schedule for this week:

Monday, March 25
09:00 GMT – Germany. IFO Business Expectations;
09:00 GMT - Germany. IFO Current Assessment;
12:30 GMT - USA. Chicago Fed National Activity (Feb).

Tuesday, March 26
21:45 GMT – New Zealand. Trade Balance;
21:45 GMT - New Zealand. Import/Export;
07:00 GMT - Germany. Gfk Consumer Climate;
12:30 GMT - USA. Housing Starts;
12:30 GMT - USA. Building Permits;
13:00 GMT - USA. House Price Index;
13:00 GMT - USA. S&P/CaseShiller House Price Index;
14:00 GMT - USA. Consumer Confidence.

Wednesday, March 27
01:00 GMT – New Zealand. Reserve Bank of New Zealand (RBNZ) Interest Rate Decision;
01:00 GMT - New Zealand. RBNZ Rate Statement;
08:00 GMT - Eurozone. ECB President Draghi Speaks;
12:30 GMT - Canada. Trade Balance;
12:30 GMT - USA. Trade Balance;
13:30 GMT - Eurozone. ECB's Mersch Speaks;
14:00 GMT - Switzerland. SNB Quarterly Bulletin (Q1).

Thursday, March 28
23:50 GMT - Japan. Foreign Investments in Japanese Stocks;
08:00 GMT - Eurozone. Consumer Credit;
10:00 GMT - Eurozone. Consumer Confidence;
10:00 GMT - Eurozone. Business Climate Indicator;
12:30 GMT - USA. Personal Consumption Expenditure (PCE) Prices;
12:30 GMT - USA. Core Personal Consumption Expenditure (PCE) Prices;
12:30 GMT - USA. GDP Annual (Q4);
12:30 GMT - USA. GDP Price Index (Q4);
13:00 GMT - Germany. Harmonised Index of Consumer Prices (HICP);
17:00 GMT - Switzerland. SNB Gov Board Member Maechler Speaks.

Friday, March 29
21:45 GMT – New Zealand. Building Permits;
23:30 GMT – Japan. Consumer Price Index (CPI);
23:30 GMT - Japan. Retail Sales;
23:30 GMT - Japan. Industrial Production;
07:00 GMT - Germany. Retail Sales;
08:55 GMT - Germany. Unemployment Rate;
08:55 GMT - Germany. Unemployment Change;
09:30 GMT – United Kingdom. GDP;
09:30 GMT - United Kingdom. Consumer Credit;
12:30 GMT - USA. Personal Income;
12:30 GMT - USA. Core Personal Consumption Expenditure (PCE) Price Index;
12:30 GMT - USA. Personal Spending;
12:30 GMT - Canada. GDP;
13:45 GMT - USA. Chicago Purchasing Managers Index (PMI);
14:00 GMT - USA. New Home Sales;
14:00 GMT - USA. Michigan Consumer Sentiment (Mar).

Author: Anthony Porter, IAFT Analyst