Dollar punished by Fed caution

715

Lukman Otunuga, Research Analyst at FXTM, said the Dollar found itself vulnerable to heavy losses on Wednesday evening, after minutes from the latest FOMC meeting illustrated concerns among policymakers over the inflation outlook.

Although Federal Reserve official expressed optimism over economic growth and expected interest rates to be raised in the “near term”, there was still growing concerns over the prolonged periods of stubbornly low inflation in the U.S.

The anxiety over low inflation questions the central bank’s ability to raise interest rates three times in 2018, consequently clouding the prospects of higher rates beyond this year, he said.

“With expectations saturated over the Fed pulling the trigger before year-end, there is likely to be an increasing focus on economic data ahead of December’s policy meeting. There is a suspicion that investors will closely scrutinize December’s FOMC meeting for fresh insights on monetary policy in 2018 and whether economic projections are trimmed down.

“Taking a look at the technical picture, the Dollar was already gasping for air into the Thanksgiving holiday, with the dovish FOMC minutes dealing the knockout blow. The Dollar Index is under pressure on the daily charts with resistance found at 94.00. Bears have broken below the 93.50 level, with the next levels of interest at 93.00 and 92.80, respectively,” said Otunuga.

Get the latest news, opinions and commentaries. Available on Android