US Federal Reserve was forced to keep the target range for the Federal Funds rate flat at 0.25-0.50% after its June 14-15 meeting, owing to continuous risks to economic outlook and stagnating inflation expectations. Domestic data has been uneven recently, with mild payrolls report considered to be the key trigger for accepting the status-quo. All member of the Federal Open Market Committee (FOMC) voted for the decision, with Kansas City Fed President Esther George abandoning her hawkish call to raise the benchmark by 25 basis points. Janet Yellen, the Chair, agreed that there are some downside forces to interest rates that may be longlasting. On the short-term basis, she admitted that the upcoming UK referendum on EU membership has weighed on the Fed's decision to postpone the upward revision to the Fed Funds target range. The famous dot plot, which reveals individual members' perceptions of how interest rates are going to evolve in the future, showed that participants continue eyeing two interest rate hikes in 2016 and three in 2017. The terminal rate for the long run has shifted down to 3% from 3.3% in the March projection. The Fed estimates a 2% GDP growth every year during 2016-2018, also reflecting a moderate downward change in the outlook. Consumer prices, measured by the PCE Index, however, are forecasted to increase 1.4% this year. This indicates to an improvement from 1.2% seen three months ago.
Unemployment in Britain declined to the lowest level since Ocotber 2005, indicating that the UK labour market has contineud to tighten. The jobless rate slid to 5% in the three months through April, according to the Office for National Statistics. The decline came as a surprise to economists, who had predicted the reading to remain unchanged at 5.1%. Employment was strong in the reported period, surging by 55,000, with the employment rate remaining at a record high of 74.2%. The claimant count rate was unchanged at 2.2% following a revision for April, the ONS reported. At the same time, wage growth, excluding bonuses, unexpectedly gathered pace in the three months to April to a 2.3%, from a revised 2.2% reported in March. When bonuses are included, the rate of pay growth also remained steady at 2% compared with economists' expectations for a decline to 1.6%. Wages, however, have remained significantly below the levels seen before the financial crisis. Low inflation has undermined earnings growth as it limits workers' bargaining power with employees. The pace of wage growth is unlikely unnerve the BoE's officials, who are predicted to keep the key rate at a record low 0.5% later in the day. They are watching closely the labour market for signs of tightening, which in turn could boost inflation.
Upcoming fundamentals: CPI data and various meetings in Europe
EUR/USD fluctuates around 1.127 on Thursday
Daily chart: The European currency booked gains on Wednesday against the US Dollar, as it rebounded off the first weekly support at 1.1192. At the moment, the currency pair is at 1.1276, and it is struggling with the monthly PP at 1.1282, which is supported by additional resistance provided above by the weekly PP at 1.1304 and the 55-day SMA at 1.1310. If the currency exchange rate breaks through this resistance cluster, it will move upwards to the first weekly resistance at 1.1362. However, in case of a bounce off from the cluster, the rate will move down, where it will face the 100-day SMA at 1.1223.SWFX traders return to previous bearish sentiment on Thursday
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade at 1.12 by August
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between May 16 and June 16 expect, on average, the currency pair around 1.12 by the end of August. Though 45% (+2%) of participants believe the exchange rate will be generally below 1.12 in ninety days, with 25% (+5%) alone seeing it below 1.08. Alongside, only 28% (+9%) of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on August 31.Dukascopy Community members are bearish on this week's perspectives of EUR/USD