The US dollar received significant support on the basis of trading early Wednesday thanks to the speech of members of the Fed Kaplan, Dudley, and Williams. However, the markets paid no attention to the words of Evans who had dovish sentiments.
Yesterday, in the comments of the head of the Federal Reserve Bank of New York, William Dudley, he did not touch on the topic of interest rates but made it clear that he believes the recent "fall of the stock market (US) is not a problem for the Fed." He continued, "The market functions quite well, has sufficient liquidity," adding that "stock market fluctuations do not affect the economy."
Another representative of the Federal Reserve, John Williams, gave a speech that touched on the topic of rates and the risk of overheating the country's economy if the process of raising interest rates is not continued. Williams is the head of the Federal Reserve Bank of San Francisco and he reported on the need to raise rates against the background of economic growth.
"Given the fact that the US economy is growing at a slightly higher rate than the trend, we should continue raising the interest rates of the Fed," he said. "The tightening of monetary policy will help to keep the economy from overheating." he added. (Dow Jones Newswires)
In our opinion, it was Williams' speeches that had a decisive effect on the foreign exchange market and pushed the US dollar, which added against the major currencies, to grow. His speech forced the markets to recall that the risk of raising interest rates in March is very high and the number of these increases may exceed the three that was planned.
As for the speech of the President of the Federal Reserve Bank of Chicago, Charles Evans, his tone was of a the traditional nature, saying that one should not rush with raising borrowing costs. It was ignored.
Yesterday's decision of the RBNZ on monetary policy preserved, as expected, and left interest rates unchanged. However, its soft rhetoric essentially followed the RBA. The two realized that they will not rush to raise interest rates. On this wave, we expected the NZDUSD pair to fall.
Today, the Bank of England will hold a meeting on monetary policy. There are doubts in the markets that the regulator will be actively signaling an early increase in rates and not a strong increase in inflation. Sterling also continues to be hampered by the factor of the inability of the British authorities to agree on the conditions for Britain's withdrawal from the EU. We believe that following the meeting, the British currency may fall.
Forecast of the day:
The EURUSD pair broke out of the range of 1.2360-1.2500 on the wave of increasing prospects for raising rates in the US. If the price does not rise above 1.2290, it may fall to 1.2160.
The GBPUSD pair is trading above the level of 1.3850. If, following the results of the meeting of the Bank of England, there is no sure signal about the possibility of raising rates at the May meeting, the pair may fall to 1.3740.