During the Asian session, the euro holds its positions against the dollar trading near yesterday’s high, after the announcement of the US Federal Reserve on monetary policy. Yesterday, the US dollar initially rose after the FOMC announcement but for quick handed its positions, as the Fed’s statement, issued after a two-day meeting, led investors to revise their expectations of rising interest rates before the end of the year.
The US Federal Reserve, following the meeting, raised its assessment of the situation in the economy, saying that the short-term risks to the outlook have decreased. The leaders of the central bank left the door open for a rate hike later this year, possibly as early as September. Nine out of ten members of the committe voted to keep the key interest rate range unchanged at 0.25% -0.5%, but more optimistic assess the situation on the labor market and in other sectors of the economy.
Some investors expect the Fed clearer signals regarding the rate hikes in the coming months. CME Group recently pointed out that investors see a 24% probability of a rate hike in September compared to 27% probability earlier on Wednesday.
The Australian dollar strengthened against the background of the widespread weakening of the US dollar. Also today the Australian Bureau of Statistics said that export prices in the second quarter increased by 1.4% after a decline of -4.7% in the first quarter. Agricultural products and minerals account for over 60% of the exports of manufactured goods Australia. Thus, changes in raw material price movements affect the Australian economy and leads to volatility for the Australian currency. The rise in prices is a medium-term risk as the price increase is accompanied by a fall in demand.
Import Price Index in the second quarter decreased by 1%. The decline has been less than in the first quarter, when the import price index weakened to -3%. The higher the price of imported goods, the greater the effect will be on inflation.
The combination of higher export prices and lower import prices trade gain 2.7% for the quarter. This value can be added in the calculation of GDP for the second quarter.
The yen traded mixed on the eve Bank of Japan meeting. It is expected that BoJ will carry out an easing of monetary policy to support the economy.
“Large-scale measures of fiscal stimulus may cause the Bank of Japan to go to more drastic steps – said Marc Chandler of Brown Brothers Harriman -. It seems that market participants remain skeptical.”
Yesterday, Prime Minister of Japan Shinzo Abe has made it clear that the government is preparing a stimulus package totaling 28 trillion yen.
“If the Government of Japan intends to revive inflation expectations, it is not enough to repeat the previous incentives should include in the program budget spending to stimulate consumption and capital investment.” – SMBC Friend Securities.
EUR / USD: during the Asian session, the pair was trading in the $ 1.1050-65 range.
GBP / USD: during the Asian session, the pair was trading in the $ 1.3170-85 range.
USD / JPY: during the Asian session, the pair was trading in Y104.60-80 range.
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