FOMC Decision, Ad-hoc ECB Meeting, and Pound Slump Under the Spotlight

Will the Fed Deliver a 75bps Hike Today?

The US dollar traded higher against all but one of the other major currencies on Tuesday and during the Asian session Wednesday. It gained the most versus GBP, NZD, and AUD in that order, while the currency against which it failed to record any gains was EUR, with EUR/USD found virtually unchanged this morning.

ECB Announces Ad-Hoc Meeting to Discuss Market Conditions

Now, staying in the central bank sphere, at the time of writing this report, the ECB announced that it will hold an ad-hoc meeting today to discuss current market conditions. In our view, they are referring to the bond market rout in Europe, especially peripheral bonds. At its latest meeting, the Bank failed to clearly communicate how they will deal with “fragmentation” risks when they start raising interest rates, and that’s why we saw participants selling so aggressively regional bonds.

EUR/USD — Technical Outlook

EUR/USD traded higher today, after hitting support at 1.0400 yesterday. However, in the bigger picture, the rate remains well below the downside resistance line drawn from the high of February 10th, and below the key resistance zone of 1.0625/50. In our view, this keeps the near-term picture negative.

Pound Slumps on New Scottish Referendum Chatter

Flying to the UK, the British pound was the main loser, being abandoned after Scotland’s First Minister Nicola Sturgeon said that she was set to share details on plans for moving ahead with a new independence referendum without the consent of the British government.

EUR/GBP — Technical Outlook

EUR/GBP jumped sharply to the upside yesterday, distancing well itself from the upside support line drawn from the low of April 14th. This also resulted a clear break above the key resistance zone of 0.8585, which in our view, is a trend continuation signal. With all that in mind, even if we see the rate correcting its overstretched rally, we will continue aiming higher.

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