The Dollar staged a recovery yesterday after the knee jerk reaction from Wednesday’s nights FOMC meeting. The Dollar closed yesterday’s session and is currently at levels last seen at the beginning of this week (pre FOMC meeting). The market has now had time to decipher the statement and has come to the opinion that it may not be as dovish as previously expected. Ultimately the door has still been left open for a June rate hike whilst some economists’ may be overly cautious thus forcing the FOMC’s hand to raise rates. The Fed is forecasting unemployment to be at a rate between 5.0-5.2%. Currently it is at 5.5% and has fallen 1.2% in the last year, suggesting that the Fed’s current projection will fall below the forecast this year.
The calendar was fairly quiet yesterday as the employment data from the US continued to remain positive as the weekly jobless claims remained below 300k, beating forecast. Meanwhile, the Philly Fed manufacturing disappointed slightly as the survey pointed to little change in business conditions.
This side of the Atlantic we saw comments from some leading officials. France’s Hollande reminded Greece that an accord had been reached on 24th February and that this needed to be implemented, keeping the subject matter in the headlines. Meanwhile, BoE policy maker Haldane argued that a shock rate cut could help growth and boost inflation. This surprised markets as many forecasters had been discussing when they thought the interest rate hike will come from the BoE. If we see inflation continue to slide and growth slow, then a cut in the main bank rate could become more probable.
Looking to the day ahead, the focus will remain on Greece as the EU Economic Summit continues for a second day. In the UK, the public sector borrowing numbers are set for release. Crossing the pond, Fed members Lockhart and Evens are speaking at separate events. After Wednesday’s FOMC meeting there could be questions regarding the statement thus shedding more light on the views of the central bank.