Global macro overview for 15/06/2017:
The Federal Reserve Bank hiked the interest rate from 1.00% to 1.25% as it was priced in by markets. As it was a predictable move, it did not make a big impact on the market. The announcement also suggested that the FED would maintain a policy of reinvesting interest on purchased bonds for the time being, but it would probably start balancing this year. FED Chairperson Jannet Yellen said during the press conference, that central bank expects to implement its balance sheet normalization plans this year, initially trimming holdings of Treasury securities by $6bn per month and $4bn per month for mortgage-backed securities. However, this will (as usual) depend on ongoing economic data. In the near term, inflation in the US is expected to remain slightly below the 2% target, but in the medium term, the FED targets should be reached as household spending has picked up and fixed investment has continued to expand.
In conclusion, the statement and rate projections contained no major surprises and were close to expectations. There was an 8-1 vote for the decision with Minneapolis FED President Kashkari again dissenting and preferring to wait for further evidence. Moreover, according to the dot plot, 8 of the 16 FOMC members are seeing one further rate increase this year, which will probably happen rather in December than September. The US Dollar should benefit from this decision in the nearest future as the hawkish FED statements will make the US Dollar to appreciate across the board.
Let's now take a look at the US Dollar Index technical picture on the H4 time frame. The price is bouncing from post-FOMC low at the level of 96.32 and it looks like it is heading to test the level of 97.51 again. A breakout higher will help the bulls to regain the control over this market.
