World major currency witnessed a speculative move, as after yesterday’s Fed decision.
The greenback plunged to nine month low of 101.10 down 0.90% yesterday. Dollar saw pressure, after the Federal Reserve’s latest interest rate decisions and guidance brought the end of the current policy tightening cycle into view. Greenback lost around 2.40% so far this year as traders have bet on the interest rate differentials between the dollar and other G10 currencies narrowing.
The Fed’s 25 basis points interest rate increase on Wednesday came after a year of larger hikes. Though its statement said policymakers expected “ongoing increases” going forward, traders leapt on Powell’s “disinflationary” view.
Dollar pressured by anticipation of interest rate hikes by the European Central Bank and the Bank of England, which bolstered the euro and the pound. Both banks are expected to hike rates by 50 bps each and signal more incoming hikes as they move to contain high inflation. Both central bank meeting are due later today. This would take the Bank of England’s Bank rate to 4.0% and the ECB’s deposit rate to 3.0%.
The weakness of the Eurozone and British economies is likely to ensure that there is opposition in both banks to such a large step: Eurozone inflation fell by more than expected in January, while household spending and borrowing slowed sharply in the U.K. at the end of last year. That presents both banks with a communication challenge later.
The BoE’s decisions are due at 5.30pm, while the ECB’s are due at 6.15pm.
Technical View
On the above daily chart, EURINR spot gave a strong breakout at 88.85 and trading at 90.3162. A formation of long bullish candlestick is also indicated for bullish momentum in near future.Â
It is expected that, any dip towards 89.90-90.00 will attract near future buying activities and EURINR spot could test next resistance 90.50-90.80.
European Central bank policy decisions could decide the next move of EURINR.