US Dollar Preview Ahead of FOMC Minutes, Coronavirus – Talking Points
- US Dollar may rise on liquidity demand if FOMC minutes spook markets
- Coronavirus pandemic continues to muddy the global growth outlook
- GBP/USD capitulation may be ahead as pair eye descending resistance
The anti-risk Japanese Yen rose versus its G10 counterparts while the cycle-sensitive Australian and New Zealand Dollars fell with US equity futures. The risk-off tilt came as investors continue to closely monitor the impact of the coronavirus pandemic with market-wide expectations of a recession. It appears that the only point of contention is its depth and severity, rather than its – what many perceive as – inevitability.
US Dollar Analysis Ahead of FOMC Minutes
The US Dollar may rise if the FOMC meeting minutes from the March 15 policy announcement sparks risk aversion and boost the haven-linked Greenback. That day, not only did officials cut interest rates to 0.25-0.00 percent, but they also announced a $700 billion bond-purchasing program. $500 billion was to be devoted to Treasuries with the remaining $200b directed to purchasing mortgage-backed securities.
Despite this bazooka-level stimulus, growth-oriented assets suffered. While officials had hoped the credit-easing measures would boost confidence, it had instead produced the opposite effect. The Fed’s policies were likely seen as an official acknowledgement that conditions were so poor that it warranted a level of stimulus of that magnitude. If the underlying tone of the FOMC minutes reflect this same level of urgency, the US Dollar may rise at the expense of growth-oriented assets. Learn about why gold may suffer too.
GBP/USD has made a remarkable recovery after it bottomed out at 1.1452, though it appears to now be on a modest corrective path. The pair’s bold price action began to turn more timid around late March before starting to trade below ever-steepening descending resistance. Looking ahead, if GBP/USD attempts to clear it to no avail, then a deeper correction could be up next.
GBP/USD – Daily Chart
GBP/USD chart created using TradingView
US DOLLAR TRADING RESOURCES
— Written by Dimitri Zabelin, Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter