The U.S. dollar hogged the limelight on Wednesday with an unusual volatility before and after Fed’s rate hike. Today, the traders’ attention will be focused on the BoE policy meeting.
Fed Surprised Positively with Hawkish Projections
U.S. dollar had a crazy ride yesterday before and after the Fed policy meeting. The ICE U.S. dollar index dropped nearly 0.8% in a few hours right after the release of the CPI and retail sales which raised concerns for Fed’s tone. The headline inflation rate fell short of shortcuts to 1.9% in May versus 2.0% expected and 2.2% before. Retail sales also dropped below forecasts and contracted by 0.3% month-over-month, versus 0.4% before, while the market was expecting a slowdown to 0.1%.
The dollar found support after Fed announced a fund rate hike of a quarter basis point to 1.00%-1.25% as expected and gained strong momentum to the upside, covering all its earlier losses, after the publication of the economic projections. The central bank didn’t change inflation and interest rate forecasts for 2018 and 2019. Moreover, they raised 2017 GDP growth to 2.2%, up from 2.1%, while they kept forecasts for 2018 and 2019 unchanged at 2.1% and 1.9% respectively. In addition, they lowered unemployment rate predictions to 4.3% in 2017, 4.2% in 2018 and 4.2% in 2019, down from 4.5% for all the three years in prior projections...
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