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EUR/USD and GBP/USD surge while USD/JPY falls as dollar weakens after Fed meeting

The Fed’s shift last night has seen a rapid response from FX markets, as the dollar weakens in expectation of cuts to interest rates.

EUR/USD stages turnaround in wake of FOMC

It is tough trading EUR/USD. First a dovish European Central Bank (ECB) sends the pair downwards, and then a dovish Federal Reserve (Fed) comes along and sends it heading skywards.

It is possible that the bounce this week from $1.12 creates a higher low for the pair, perhaps bottoming out after declines since the end of September. A rally above the early June high of $1.135 would be needed to provide a more bullish view in the longer term. Having rallied by 100 points in the past two days, a pullback may occur, and it will be vital to watch this to see if buyers appear to create an intraday higher low.

GBP/USD soars after dovish Fed

GBP/USD has surged thanks to the weakening US dollar and is now poised to challenge the $1.275 area that marked the peak in late May and early June. A near-straight line move since Monday may well result in a short-term pullback, but this may see further buyers emerge.

No one currently expects the Bank of England (BoE) to follow the dovish path of the ECB and the Fed, but there is not much the UK central bank can say that will convince anyone. The most credulous that its next move will be a rate hike.

USD/JPY breaches May low

A dovish Fed has resulted in a push lower for the USD/JPY pair, and is currently moving below the low of late May around ¥107.80.

Further declines target ¥106.80 in the short term. As with EUR/USD and GBP/USD, the move since Monday has been rapid and relentless, so a short-term rebound is possible, but this would likely set up a fresh selling opportunity if the recovery fails to move back above ¥108.50.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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