Global macro overview for 22/02/2018

The minutes of the January FOMC meeting did not include any hawkish hints, which resulted in temporary disappointment of investors and weakening of the US Dollar. Nevertheless, the assessment of the outlook for the US economy which was raised in the recent FOMC statement means that the March interest rate hike is decided. Such a move on the part of the Fed is already priced by market participants with over 85%. probability. In the one-year horizon, the interest rate is discounted by 75 bp. Let us add that the document described the discussion at the meeting, which took place before the last turbulence on Wall Street and a high reading of inflation indicators. At the beginning of Powell's term, the Fed seems to be more confident and ignores the dynamics of inflationary processes, paying more attention to financial conditions. If such an attitude is confirmed at the March meeting with a press conference and new macro projections, it will be a sign of a positive exchange rate change and rhetoric for the US Dollar. Moreover, it is worth to notice that in 2018 L. Mester and J. Williams will have the right to vote in FOMC, which moves the center of gravity slightly towards supporters of a more restrictive policy.

Let's now take a look at the US Dollar Index technical picture at the H4 time frame. The price has hit the lower line of the downward channel around the level of 90.20 again and so far the rally from the low at the level of 88.26 was capped. The next technical resistance is seen at the level of 90.59 and the nearest support is seen at the level of 89.63. Please notice the overbought market conditions favour the temporary pull-back before any potential new high is made.

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