US Dollar edges higher to 94.70 as FOMC stays put with funds rate
- FOMC announced no changes to the monetary policy as expected.
- USD is waiting for the announcement of the next Fed chair.
The US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, dropped to the 94.50 region with the first market reaction to the FOMC statement but quickly changed its direction and was last seen at 94.70, up 0.26% on the day.
Fed on track for a December rate hike
On Wednesday, the FOMC stated that it kept the policy rate unchanged at its current target range of 1.00% - 1.25%. According to the statement, the Committee sees the labor market continue to strengthen with the economic activity expanding at a solid rate despite the impact of the hurricanes. Following the FOMC decisions, the December rate hike probability rose to 97.7% from 97.2% according to the CME Group FedWatch tool.
- Fed meeting: Interest rates unchanged at November meeting
- FOMC statements: Comparison between September and November
With the FOMC meeting out of the way, investors' attention turns to tomorrow's revelation of the next Fed chair. “President Donald Trump is expected to announce his decision on Thursday and is said to be leaving towards Fed Governor Powell. However, Trump is known for changing his mind with other potential candidates including Stanford University Economist Taylor, former Fed Governor Warsh and current Chair Yellen. If Trump opts for Taylor or Warsh, we are likely to see the US dollar firming and US bond yields rising sharply, at least initially, as the markets will start pricing in higher interest rates,” Rabobank analysts argued in a recent report.
Technical levels to consider
The initial hurdle for the pair aligns at 95.00/95.05 (psychological level/daily high) ahead of 95.60 (Jul. 14 high) and 96.25 (Jul. 5 high). On the downside, supports are located at 93.85 (100-DMA), 93.35 (Oct. 26 low) and 92.85 (50-DMA).