Dollar Index Keeps Rising As Markets Digest Fed’s Message

The US Dollar index surged after last week’s FOMC meeting. The Federal Reserve turned hawkish on inflation already reaching its target and positive developments on the labor market.

The Federal Reserve of the United States delivered a hawkish statement and press conference last Wednesday. Ever since, the greenback has reversed sharply, gaining against all its G10 peers.

Naturally, the stock market reacted, but not as much as bears thought. However, the main indices closed the previous trading week at the lows, and fears mount that more weakness lies ahead.

While the Fed is the first major central bank in the world to signal a shift in the accommodative policy, other central banks may follow. This week it is the Bank of England’s turn to deliver its monetary policy stance, with the likelihood of signaling a similar message as the Fed did.

Therefore, the FTSE 100 index and the British pound pairs are on focus this week. The UK index remains elevated above 7,000 points, while the pound gave back some of its gains against the US dollar after last week’s Fed meeting.

The price of oil remains close to its highs, despite the US dollar’s strength. On the other hand, gold has lost its momentum, as it tumbled from $1,900 to below $1,800 on dollar buying.

Daily Analysis

Nothing to mention from an economic calendar’s point of view today, except Christine Lagarde’s testimony in front of the European Parliament. However, her testimony is unlikely to move the euro significantly as the European Central Bank made its plans clear for the period ahead.

Markets to Watch

FTSE100, GBP/USD, EUR/JPY – markets in focus today.

FTSE100

The FTSE100 has struggled to get above 7,000 points this year. It reached as high as 7,200, but at that level, it met dynamic resistance given by the upper edge of a rising wedge pattern. The subsequent bearish move that followed has put further pressure on the index, especially given the fact that the Bank of England’s monetary policy is expected this week.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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