The USD declined after the Federal Reserve delivered its interest rates decision. The bank left interest rates unchanged at a range of between 2.25% and 2.50% as was expected but hinted they would cut rates in the months ahead if the economic outlook weakens. This would be the first rate cut since 2008 and a sign that the economy was indeed slowing down. At the press conference, Jerome Powell said that with trade talks having stalled, he expected the Fed to be more accommodative in its policies. Traders are now pricing-in a rate cut in September this year.
The Japanese yen was relatively unchanged after the BOJ delivered its interest rates decision. The bank left interest rates unchanged as was expected. Officials also warned about the increasing risks of the current trade tensions and protectionism. It also pointed to additional stimulus to facilitate growth in the economy. The bank left rates unchanged at minus 0.1% and pledged to guide the 10-year government bond yields to around zero percent. It will also continue buying government bonds worth more than $738 billion a year.
Focus will now be on the Bank of England, which will release its interest rates decision later today. As with the other central banks, it is expected to leave rates unchanged at the current level of 0.75%. Members are expected to vote unanimously for this. The bank is also expected to continue with its QE program. All this is expected because the UK economy has been struggling and is currently at a crossroad, with the next Prime Minister expected to be named this week. Other important economic data expected today will be the Philadelphia Fed Manufacturing Index, US jobless claims data and UK retail sales.
The EUR/USD pair soared in overnight trading following the decision by the Federal Reserve. The pair reached a high of 1.1273, which was higher than the week’s low of 1.1180. On the hourly chart, the pair is currently above the 50-day and 25-day moving averages while the RSI has moved above the overbought level. The price is along the upper line of the Bollinger Bands. It’s likely that the pair will test the important support of 1.1300.
The GBP/USD pair continued the upward trend started on Wednesday this week when the pair started moving upwards from a low of 1.2505. It is now trading at the 1.2690 level, which is above all the shorter and longer moving averages on the hourly chart. The RSI has moved from a low of 9 on Friday to the current 75. The pair will likely react to the statement by the Bank of England later today. This will see it test either the support of 1.2600 or the resistance of 1.2700.
The USD/JPY dropped after the Fed interest rates decision but was relatively unchanged after the BOJ decision. It reached a low of 107.55, which was the lowest level since January 8. On the daily chart, the price is below the 25-day and 50-day moving averages while the RSI has dropped to the oversold level of 30. The signal line of the stochastics oscillator declined to almost the oversold level. The pair will likely continue to decline to test the 107 support level.