After Trump-Biden debates the market reaction was initially positive, but Trump's refusal to accept election results in case of Biden’s victory deteriorated the overall sentiment.
Forex today: why the rate hike could not support the USD?
The US dollar is continuing to fall. Even a rate hike could not support the greenback.
- Yesterday the Fed announced an interest rate. As expected, it was increased by 25bp. Investors looked for clues on the future rate hikes, however, the Fed could not clear the question. According to projections, FOMC’s members were split down the middle on the issue. So it is still unclear whether the Fed raises the interest rate 3 or 4 times this year.
- Yesterday was a day of central banks. The Reserve Bank of New Zealand announced an interest rate. It is not a surprise that the rate remained at 1.75%. It was the last statement of the acting Governor Grant Spencer. His term ends on March 26, a new Governor Adrian Orr begins on March 27. Also, it was the final decision under the existing Policy Targets Agreement (PTA) between the RBNZ Governor and the Minister of Finance. Mr. Orr will sign a new PTA before he starts. Let’s see if changes in the RBNZ will support a further rise of the kiwi. As the decision was anticipated, it did not affect the kiwi. The NZD/USD pair is continuing to rise. It has come to the resistance at 0.7250. If it is able to hit it, the next resistance lies at 0.7290.
- The yen is continuing to rise because of the weak dollar. The USD/JPY pair has moved down to the support at 105.5 again. If it is able to break the support this time, it will go to the next level at 105.
- The pound is rising ahead of the Bank of England meeting (14:00 MT time). Interest rate and asset-purchase program are anticipated to remain unchanged. However, investors expect a hawkish-sounding speech and look for the clues on rate hikes. There is a possibility that the BOE will increase the interest rate in May this year.
- The market expected the US tariffs against China to be imposed on Friday, however, the date changed and Mr. Trump is going to enact $50 Billion tariffs today. Former vice commerce minister and now an executive deputy director of the China Center for International Economic Exchanges commented on the news immediately. He said: "If Trump really signs the order, that is a declaration of the trade war with China.” So trade wars are gathering pace.
- The AUD is falling again. First of all, unemployment rate and employment change data were weak. Employment changed in 17.5K (instead of 19.8K), the unemployment rate appeared higher than expected – 5.6% vs 5.5%. Moreover, worries about trade wars negatively affect the aussie.
- As the US dollar is falling, other currencies have opportunities to strengthen. No important data is anticipated today and tomorrow except Canada. CPI m/m and core retail sales m/m will be released tomorrow at 14:30 MT time. If actual data are greater than forecast ones, the loonie will be able to continue its rise.
- Yesterday oil could reach significant highs as the US inventories fell for the first time in a month. Crude Oil Inventories showed a negative data (actual -2.6M vs expected 2.6M). Brent was traded near $69.80 a barrel, WTI near 65.40. However, today both oil benchmarks are weakening. Brent dropped to $69, WTI to $65.
The market sentiment has switched to risk-on, driving upwards stocks and riskier currencies and weighing on the US dollar.
Non-Farm payrolls will be out on Friday at 15:30 MT time! Are you ready?
US ISM Manufacturing PMI is coming out on Thursday at 17:00 MT time! Be ready!