Daily Currency Update

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A pinch of green for the dollar

USD - United States Dollar

The Federal Reserve concludes its first meeting today since the $1.9 trillion stimulus package was passed. Although most believe that the Fed won’t make major policy changes, investors are watching closely.

Since the Fed’s last forecast in December, The Economist reported that the yield on 10-year Treasury bonds increased about. 0.7%. In the meantime, equity markets have been choppy. So why does that matter for the US dollar?

If the Fed’s not likely to raise interest rate, then bond yields become the signifier of future potential growth. As yields increase, investors seek US dollars to buy them and the demand for the US dollar goes up.

The Fed releases its economic projections and statement today at 2:00pm EST.

Key Movers

The pound has been surprisingly quiet, with direction being taken from other currencies including the euro and USD. GBPUSD did break above the magic 1.39 overnight, having spent much of yesterday in the 1.38s. GBPEUR also broke the psychological 1.17 barrier in the early hours of this morning but it is yet to be seen if this break can be sustained.

The euro tracked below 1.19 as Europe’s vaccination roll out remains in disarray with 16 countries now suspending the AstraZeneca vaccine from their roll-out schedule. Authorities remain adamant the benefits continue to outweigh the risks. Italy and Germany introduced new social distancing measures in a bid to curtail fresh outbreaks.

The Australian dollar tracked sideways through trade on Tuesday, maintaining a narrow range centered around resistance at 0.7750 and support on moves approaching 0.7710. Price action across financial markets was muted in general as investors appear content in maintaining the current holding pattern and brushing aside volatility across macroeconomic data sets. US retail sales and industrial production both tracked lower through February yet were ignored by investors who instead set their focus toward future optimism.

Expected Ranges

EUR/USD: 1.188 - 1.191 ▲

GBP/USD: 1.287 - 1.392 ▲

AUD/USD: 0.770 - 0.775 ▲

USD/CAD: 1.243 - 1.248 ▲