FED LEAVES RATES UNCHANGED AND US DOLLAR GOES TO 1987 MINIMUM

After the first meeting of the year of the European Central Bank, it was the time for the Federal Reserve January meeting.

As expected by analysts, Janet Yellen’s Fed decided to leave the monetary policy structure unchanged at the reference rates between 1,25% and 1,5%.

For Janet Yellen it was the last meeting as a President and left a commission ready to raise rates gradually if the US economic conditions evolve.

According to the Federal Reserve, the US economy continues to grow at a “solid pace” and the labor market continues to gain ground. The optimism of the economic outlook consolidates investors’ expectations for a rate hike at the end of March meeting.

It is the ninth consecutive year of economic expansion, but the Federal Reserve is still committed to stimulate a faster growth, partly due to slow inflation.

The oath as the new president of the Federal Reserve of Jerome H. Powell, already a member of the Fed’s board since 2012, will take place on Monday’s matriculation.

Just like the analysts who were not surprised by the Fed’s decision, the euro-dollar exchange rate did not make big mortal balances either.

Before the announcement of the FOMC, the euro dollar exchange has traveled in the area 1,2410 / 1,2420. At the time the Fed communicated its monetary policy decisions EUR/USD skipped over 1,2440, soon abandoned for a return to 1,2395.

The impact of the meeting appeared decidedly limited, despite the leaked Federal Reserve optimism.

Fed’s decisions turned out to be a real non-event for the euro-dollar currency pair and they failed to deliver bullish momentum to the US dollar, which closed off the worst month of its history since 1987. Investors do not seem to unbalance until the cues are more consistent.

The real data came later with requests for unemployment benefits in the United States that fell below analysts’ forecast.

The requests submitted last week were 230.000, against the 238.000 expected by the experts. The result of the previous month was revised downwards to 231.000 units.

The four-week average falls to 234.500, while continuous claims rise to 1.953 million units.

Talking about labor market, Eurozone unemployment confirmed the market’s expectations in December with a rate of 8,7% which confirmed both the expectations and the previous figure.

This figure could also be the result of the lowering of Italian unemployment that fell to the lows of 2012 (10,8%). Youth unemployment also fell by 0,2% in December, standing at 32,2%.

In the coming week will be the Bank of England the absolute protagonist. Fed and ECB monetary policy meetings have attracted the attention of the market for too long that will now have to return to focus on the United Kingdom. According to analysts, the BoE’s monetary policy meeting should end with a interest rate unchanged at 0,50%. Unchanged should also be the Quantitative Easing Program currently traveling at a rate of £435 billion.

In the week from 5 to 9 February there will be other market mover to keep under control: Eurozone and US PMI indexes and data on the oil market and weekly oil stocks.