Global macro overview for 01/02/2018

Is fed getting ready for another hike in March?

Based on generally positive information from the US economy, the Fed had the right to sound constructively on the subject of further interest rate increases and it did indeed. However, in general, the market participants did not learn anything new. The language regarding fiscal policy and inflation remained unchanged. Nothing was on the topic of Dollar value and high bond yields. A fragment with a positive assessment of economic activity has been added. At the end of his term, the president Janet Yellen wanted to leave the Fed on the way to further normalization of monetary policy, but at the same time leaving as much flexibility as possible for the taking over of Jerome Powell. As a result, market expectations for another interest rate hike in March did not change substantially and the probability valuation exceeds 90%. This helps the USD, although only in the sense that the Fed did not give an excuse for the sale of the sale after the fatal January. The general pessimism towards the USD (additional fueling optimism with respect to EUR) remains, although now the trade will be more thought-out and carefully examine the risk factors.

Let's now take a look at the UD Dollar Index technical picture. The Fed decision was highly anticipated, so the market reaction was muted and the level of 89.62 is still the technical resistance. Tomorrows NFP Payrolls labor market report might be more significant than previously thought - if the data will surprise positively, then there are quite a few short positions in USD, which may be intended for cover and this will act as a fuel to the rally higher.

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