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Home / Analytics / Forex analysis & forecasts / Forex Fundamental analysis / The dollar is back on the horse
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The dollar is back on the horse

The main currency pair dropped on Thursday morning after a long-awaited decision by the Federal Reserve System.

So, everything was decided. At the December meeting the US Federal Reserve for the first time in nine years, took the decision to raise interest rates. It is now at the target range of 0.25-0.50% per annum against the previous range of 0-0.25% per annum. Such an outcome was expected by at least 79% of the market.

We are more interested not in the decisions - they have been talked about for the last four months – but the comments. Fed restrained the degree of enthusiasm about the pace of monetary policy tightening in the future. Now it is expected that by the end of 2016 the interest rate will average 1.375% per annum, in 2017 it will "weigh" not less than 2.375% per annum, and the end of 2018 will be about 3.25% per annum. This is a more tranquil pace of the revision of monetary conditions than previously projected, but there is nothing criminal here.

The US regulator, talking about their next step, said that everything will depend on economic statistics of the United States. Among the significant risks – a drop in energy prices, likely deepening the global recession, developing economies stresses. All this may throw a negative shadow on the economic recovery of the US and get to take a break in a series of rate increases.

I do not think the Fed will raise interest rates again at its next meeting. Somewhere in the background looms the specter of very low inflation, which now the regulator prefers not to remember. It will remind of itself, if you do not deal with by incentives.

The euro/dollar, is expected, after the Fed's decision to hold near 1.0850. There is the potential weakening towards 1.08, but there will be no stormy sales right now.
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