Greenback weaker as Fed decision looms
Written by Steven Dooley, Head of Market Insights
The GBP/USD approached three-year highs while the EUR/USD was also stronger on Wednesday as the US dollar extended declines ahead of tonight’s all-important Federal Reserve decision.
The US Fed is expected to hold rates steady at 4.25% to 4.50% — a Bloomberg survey reported a unanimous finding from 94 forecasts. To say any change in interest rates would be a shock is an understatement.
However, any sign of potential cuts in the future might see the US dollar fall further, with recent Federal Reserve commentary divided between concerns over the inflationary impact of tariffs and worries about a slowdown in the labour market.
The greenback, as measured by the USD index, fell to one-week lows overnight and remains only 1.3% away from three-year lows. The Fed decision is due at 7.00pm BST. Federal Reserve chair, Jerome Powell, speaks at the follow-up press conference at 7.30pm.
GBP/USD back to “danger zone”
Written by Shier Lee Lim, Lead FX and Macro Strategist
According to the Financial Times, the United States and the United Kingdom were nearing an agreement that would reduce the impact of tariffs by allowing British steel and automobile exports to have reduced tariff limits.
The talks come after a trade agreement has been reached between India and the UK. According to the BBC, commerce between the UK and India was worth £41 billion last year and was expected to increase. However, the government said that the agreement will increase that amount by an extra £25.5 billion per year by 2040.
Looking at the GBP/USD market, the pair is near key technical resistance at the three-year highs but, while a short-term pullback is possible, because the GBPUSD is currently trading above key moving averages, any declines might be corrective in nature and the market might lean toward a positive outlook.
With a positive medium-term trend intact, there is possibility for GBP/USD to move to 1.3559.
If declines fail to recover from support at 21-day EMA of 1.3248 or 50-day EMA of 1.3069, however, the GBP/USD might see declines.
EU mulls new counter-tariffs
Written by Shier Lee Lim, Lead FX and Macro Strategist
Sticking with the trade story, according to sources familiar with the situation, Bloomberg said that if continuing trade discussions don’t produce a satisfying outcome, the European Union intends to apply extra tariffs on around EUR100 billion worth of US goods.
Member states will be notified of the possible retaliatory measures as early as Wednesday, and they will have a month to consult before the final list is created.
To begin the talks, the European Commission, the bloc’s executive branch that deals with trade issues, is allegedly going to present a document to the US this week.
As shown in the below chart, EUR/USD is nearing the overbought Bollinger Bands signal. The 21-day EMA of 1.1278 remains key support for EUR/USD.
USD lower ahead of Fed
Table: seven-day rolling currency trends and trading ranges
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Calendar: 5 – 10 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
