CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Will The Fed Drag The Dollar Lower

Article By: ,  Senior Market Analyst
May 1, 2019 8:57 AM
The Fed will conclude its two-day policy meeting with a rate decision and policy announcement at 2pm EDT, 18:00 GMT. Given that no change in policy is expected the focus will be squarely on Chair Jerome Powell’s statement and pursuant press conference at 2:30pm EDT (18:30 GMT).

The Fed made it clear in March that they are not looking to hike this year. Furthermore, it is too early for any major shift in policy language. Therefore, a lot hinges on the extent to which Fed Chair Jerome Powell acknowledges the recent improvement in economic data. 

US economic data across the month has been encouraging. Retail sales, pending home sales and manufacturing have all improved, consumer confidence is rebounding, and the US labour market remains strong. These are all points that the Fed may want to acknowledge. US GDP also smashed expectations at 3.2%, owing mainly to a big pick up in inventory. However, the Fed may struggle to get excited about strong economic growth based on an unsold inventory build-up. Inflation (PCE) unexpectedly moved lower to 1.6%, which could well keep the Fed patient.  The market is currently pricing in a 65% probability of a rate cut by the end of the year.

Which way for the dollar?
The dollar has rallied across the month of April and whilst was the buck has given back some of those gains in recent sessions there are still buyers around keeping the greenback afloat. 

Should the Fed focus on the broadly improving US data and downplay the possibility of a rate cut then we could expect to see the dollar jump higher. The USD/JPY struggled to break above 111.55 earlier today. However, under this scenario the USD/JPY could target 112.00

On the other hand, should the Fed focus on lacklustre inflation and the slowing global growth story whilst emphasizing the need to be patient, we could see the dollar take another step lower. The US/JPY could break through near term support at 111.25 and head towards 111.00.




StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024