The US dollar trades with an offer tone in early April as investors await FOMC minutes.
The main event for financial market participants today is the release of the FOMC minutes. Scheduled later in the North American session will highlight what FOMC members discussed three weeks ago at the last FOMC meeting.
Since the last FOM meeting, a new trading month has begun. This brought a stronger dollar across the board, with a few exceptions, as commodity currencies also remain well rated.
Nevertheless, the US dollar gained ground against the euro, the British pound, the Swiss franc and especially the Japanese yen. The bias is that the trend will continue as the Fed continues to hint at a 50 basis point rate hike in March.
EUR/USD remains bearish below 1.11
The EUR/USD is the most representative currency pair and often acts as an indicator of the strength or weakness of the Euro or the Dollar. The technical picture looks bearish as the market swings below the 1.11 pivot zone.
Since March, the EUR/USD pair has been consolidating with a slightly bullish bias in what appears to be a bearish flag pattern. If the recent downward move that started in April continues, traders will be pushing for the measured move, which means that 1.03 should not be ruled out in the near future.
Brainard’s speech hints at a 50 basis point rate hike in early May
One of the most anticipated speeches this week was from FOMC member Brainard. Yesterday she started with a quote from Volcker, saying that “inflation has been, and I think continues to be, the number one problem”.
Paul Volcker, chairman of the Fed during the inflationary 1970s, raised rates 150 basis points before this interview. It should be clear that Brainard’s choice to start his speech yesterday is a clear signal that the Fed is ready to do more on the rate hike front.
In other words, a 50 basis point rate hike in May is more than likely, which would push the US dollar even higher. Today’s minutes may suggest that we are closer to such a rate hike than many market participants expect. If so, expect continued US dollar strength.