NEWS / Foreign Exchange

Dollar Climbed after FOMC

The dollar climbed modestly across the board after the FOMC monetary policy announcement. The euro dipped 20 pips to new day low at 1.3523 versus the dollar and the sterling fell from 1.9965 to 1.9930.

Ten Fed policy board members unanimously voted to leave interest rates unchanged at 5.25% as expected. However, the dollar was boosted slightly as the Fed said their predominant concern is still inflation.

The post-meeting statement showed no significant change from last meeting. The Fed said core inflation remains somewhat elevated and the economy is likely to expand at moderate pace over coming quarters. It said future policy adjustment will depend on economy and inflation outlook. The Fed did not indicate it is going to cut rates anytime soon, which relieved the market a little bit.

The market is waiting for the Bank of England and the European Central Bank interest rate announcement due tomorrow morning. BOE is expected to lift interest rates from 5.25% to 5.5%, which will put the British rates above those in the United States for the first time since January 2006. ECB is likely to leave the benchmark rates unchanged at 3.75% this time.

All eyes are on the ECB chairman Trichet??™s post-meeting press conference. If he mentions that the central bank needs to be ???vigilant??? on the inflation, the market will take this as a signal for a rate increase in June. However, the market will be disappointed if he is not as hawkish as expected.

EURUSD will face interim resistance at 1.3550, followed by 1.3580 and 1.36. Additional ceilings will emerge at 1.3620, backed by 1.3650. Support starts at 1.3520, backed by 1.35, 1.3480 and 1.3450. Subsequent floors are eyed at 1.3420.

GBPUSD encounters interim resistance at 1.9960, backed by 1.9980, and 2.0000. Subsequent ceilings will emerge at 2.0030, followed by 2.0050 and 2.0080. On the downside, support begins at 1.99, followed by 1.9880 and 1.9850. Additional floors are eyed at 1.9830, backed by 1.98 and 1.9750.

USDJPY encounters interim resistance at 120.30, backed by 120.50 and 120.80. Subsequent ceilings will emerge at 121, followed by 121.30 and 121.50. On the downside, support begins at 120 and 119.70, followed by 119.50. Additional floors are eyed at 119.30, backed by 119 and 118.80.