Forex snapshot

Yesterday’s Monetary Policy Committee and Federal Open Market Committee statements continue to drive the price action of sterling and US dollar, while today’s latest Eurogroup meeting could give the euro a sense of direction.

Euro and US dollar notes being counted
Source: Bloomberg

EUR/USD heads North after FOMC statement

The last week's efforts to break below the intraday low set during Mario Draghi’s speech has proven to be a step too far, as the euro has once again strengthened against the US dollar. The 50-day moving average is at $1.3700 and the 200-DMA is trading at $1.3680, so there is still a little upside before natural resistance is hit.

As expected, the US Federal Reserve confirmed that it would cut a further $10 billion from its monthly debt purchasing scheme. There was a distinct dovish tone to the statement that saw the US dollar weaken against a plethora of major currencies.

The short term would point towards higher levels, however traders should be conscious that the European Central Bank is likely to try and talk down euro strength.

Spot FX EUR/USD chart

FOMC statement forces GBP/USD above $1.7000

The dovish statement and further reduction to the debt purchasing scheme in the US has finally seen cable set a new five-year high. As my colleague David Madden pointed out, currency traders are still trying to piece together the thoughts of Mark Carney and the rest of the MPC voting members as they have tried to alter the markets preconceptions of interest rate rising timelines.

The last 48 hours has seen the minutes reveal the MPC’s surprise that markets had ruled out an interest rate rise in 2014; of course they still all voted 9-0-0!

If GBP/USD can close above $1.700 there could be considerably more upside especially if the Bank of England does raise interest rates.

Spot FX GBP/USD chart

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