Dollar rises ahead of Fed minutes

GBP/USD and EUR/USD have lost ground overnight as traders gear up for the Federal Open Market Committee minutes tonight at 7pm (London time).

The Federal Reserve
Source: Bloomberg

GBP/USD dips before BoE minutes

Yesterday’s worse-than-expected CPI data from the UK set the wheels in monition for the overnight decline in GBP/USD, and the Bank of England minutes today at 9.30am will keep pressure on the pound. The market is expecting no change from last month’s minutes, and all nine members are anticipated to vote in favour of keeping interest rates and the asset purchasing scheme unchanged.

As I mentioned yesterday, Mark Carney stated he would cut interest rates if he felt it was necessary, but CPI would need to be in contraction before such a move. Nonetheless, the correction that GBP/USD experienced this month was halted by soft the CPI report.

Adding to the pound’s problems is the minutes from the FOMC tonight; the US is ahead of the UK in the race to increase interest rates. Improving economic sentiment from the US will force the Fed to use more hawkish language, and this will push GBP/USD lower.

The 50-hour moving average of $1.5365 is acting as resistance, and if this level is held then $1.53 will be the target. A move above the 50-hour MA will bring the upside resistance at $1.54 into play.

EUR/USD dances around $1.14

EUR/USD has dipped below $1.14 as Greece continues to hope it can obtain a bridging loan from the European Central Bank, and the indebted country wishes to keep this separate from the current bailout that is in place until the end of the month.

Greece is playing with fire as the country refuses to agree to the ECB’s terms of austerity, but at the same time is seeking emergency funding for its struggling banking system. The market believes that some sort of compromise will be struck in the end, because if the ECB doesn’t provide emergency financing to the Greek banking system it would effectively be kicking the nation out of the eurozone.

The $1.14 level is currently acting as resistance and if this level holds it will make the 200-hour MA of $1.1360 the target. A move above $1.14 will bring the upside resistance of $1.1440 into play.

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