Euro fell after Powell's speech
On Wednesday, January 27, the euro closed down 0.55% to 1.1239. The euro/dollar pair was trading in a limited range before the announcement of the US Federal Reserve's decision on rates.
The American Central Bank left the rates unchanged at the level of 0.0%-0.25%. The Fed has signaled that it will start raising interest rates soon and then reduce its holdings of bonds. The central bank is ready to raise rates in March. Balance reduction plans to begin immediately after the rate increase.
The hawkish turn came amid consumer inflation hitting 7%, the highest since the 1980s, and a tight labor market that saw unemployment fall faster than expected to near pre-crisis levels.
Calm in the market did not survive Powell's press conference. Chairman Jerome Powell's attempts to explain the policy outlook led to a marked increase in government bond yields, a sell-off in stocks, and a rise in the dollar.
The Fed's statement did not satisfy those who called for maximum policy flexibility. It also didn't satisfy those who worry that the Fed is lagging behind economic realities and may well be forced into an excessive package later this year.
The rate hike will be the first central bank hike since 2018. 3-4 increases are expected this year. Critics say the Fed has moved too slowly and is behind schedule in fighting inflation.
Scheduled statistics (GMT +2):
At 10:00 in Spain, the unemployment rate for the 4th quarter will be released. 2021.
At 13:00, the UK will publish the CBI sales index for January.
At 15:30 in the US, there will be preliminary GDP data for the 4th quarter. 2021, Durable Goods Orders for December, Initial Jobless Claims for January 14-21.
At 17:00 the US will publish a report on the change in the number of pending sales in the housing market in December.
At the time of writing, the major currencies are trading in the red. The Australians (-0.77%) and the New Zealanders (-0.68%) bear the greatest losses. After J. Powell's speech, futures for US indices went negative (losses of more than 1.3%). The dollar index has updated a maximum of 96.65 points.
The euro fell to 1.1215. The price is at the lower border of the two-month channel. The rebound attempt failed after the US Federal Reserve meeting. The risks of falling euro/dollar to 1.0800-1.0950 (daily and weekly TF) have increased.
The focus today is on US GDP for the 4th quarter of 2021. Investors in the foreign exchange market are looking with one eye at the dynamics of bonds, with another eye at stock index futures. Trading in Europe opened calmly. Futures on the SP500 index is trying to develop an upward movement. Euro crosses show mixed dynamics, so a sharp movement should be expected after the release of US statistics.
Summary: on Wednesday, the euro closed lower after a press conference by J. Powell. Attempts by the chairman of the head of the US Federal Reserve to explain the prospects for policy have led to a noticeable increase in the yield of government bonds, the sale of shares and the appreciation of the dollar. Euro crosses show mixed dynamics, so a sharp movement should be expected after the release of US statistics.