Fundamental Analysis

A Dovish Stance By The FED

Money Management

FED Chair Janet Yellen gave a much more dovish view on interest rates and there were hints that rates may return to zero. A cautious and gradual approach to adjusting monetary policy should be taken.

OVERNIGHT

On the back of dovish comments from Janet Yellen we saw a weaker US Dollar. ‘Given the risks to the outlook, I consider it appropriate for the Committee to proceed cautiously in adjusting policy,’ Yellen told the Economic Club of New York in prepared remarks. The FED (Federal Reserve) will unlikely be raising the Federal Funds Rate in next months meeting. There were comments on easing policy, ‘By contrast, if the expansion was to falter or if inflation was to remain stubbornly low, the FOMC would be able to provide only a modest degree of additional stimulus by cutting the federal funds rate back to near zero,’ Yellen said. The FEDs toolbox is hardly empty and Janet Yellen stated that the FED could use forward guidance or quantitative easing to stimulate the US economy if required.

Prior to the Janet Yellen speech the Consumer Confidence reading came in much better than expected to 96.2 from a forecast of 93.9. US Consumers felt comfortable about the economy with the stabilisation of the markets over the past few weeks. We may see consumer consumption increase over the coming weeks as the consumer benefits from low unemployment.

The NZDUSD was the best performer after the Yellen speech as it rallied from a low of 0.6728 to 0.6869. The pair is now testing the resistance level around 0.69c handle. Continued dovish stance from the FED could see NZDUSD test the 70c handle.

Courtesy: actionforex.com

About the author

Forex Analyst

Add Comment

Click here to post a comment

Your email address will not be published. Required fields are marked *


Topics

forexing24-ad-1

forexing24-ad-2

  • analystfx-small.jpg
  • analystfx-small.jpg
  • medium.jpg
  • medium.jpg
  • medium.jpg
  • medium.jpg

Recommended Forex Broker

  • banner-300x250-gif-animation-2.gif