The Federal Reserve On Hold Despite Pressure To Cut

Summary

  • The Federal Reserve shows no bias to hike nor cut interest rate.
  • Fed Chairman Jerome Powell believes subdued inflation is "transitory".
  • U.S. stocks fell and the Dollar strengthens as odds of a rate cut drops.
  • Technical Analysis using Elliott Wave suggests U.S. Dollar should continue to strengthen.

The Federal Reserve has concluded its two-day meeting and decided to hold rates steady. It notes that inflation is running below the target of 2% but can be due to "transitory" factors.

 

With this decision, the Fed also resisted White House pressure to cut interest rates.  President Donald Trump has continued to attack the Fed several times. On Tuesday, he tweeted a series of posts to put the pressure to the Fed hours after they began the two-day meeting. Trump suggested the Fed should cut interest rates by 1% and implement more quantitative easing.

 

 

Federal Reserve under pressure by Trump

 

This week's decision by the Fed affirms the March's meeting outcome signalling no rate change for the rest of 2019. In the previous meeting, the Fed said low inflation, weak global growth, and tightening financial conditions warranted a pause in the interest rate hike cycle. The FOMC statement also mentions that it will be patient as it weighs future interest rate moves. On the economic front, the Fed notes that economic activity "rose at a solid rate."  The global risks which have caused the Fed to pause last year has moderated.

The market continues to bet on a rate cut, but the odds of it happening are reduced after the Fed's press conference. The U.S. Dollar reacted favorably and started to rally which is what we have been forecasting at Elliottwave-Forecast.

USDCHF Daily Elliott Wave Shows Bullish Sequence

 

We have shown the chart above in our previous article "Strong U.S. GDP supports the global market and U.S. Dollar" USDCHF shows a bullish sequence from February 29, 2018 low favoring further upside. The pair has also broken above the wedge-like consolidation. Yesterday, it retested the breaking point of the structure and has since rallied again. It should continue to find support and has scope to reach the 100% area towards 1.043 - 1.064.

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