WEEKLY REVIEW: The Fed’s interest rate hike in March is unlikely at the moment
05.02.2016, 17:00

WEEKLY REVIEW: The Fed’s interest rate hike in March is unlikely at the moment

Speculation that the Fed will delay its further interest rate was in focus this week. The U.S. dollar dropped as market participants expect the Fed will not raise its interest rate at its March monetary policy meeting. This speculation was supported by comments by New York Fed President William Dudley. He said on Wednesday that financial conditions were tighter than in December, and a stronger U.S. dollar could have "significant consequences" for the U.S. economy. He pointed out that the Fed would have to take that into consideration making its decision at its March monetary policy meeting.

Dallas Fed President Robert Kaplan also said this week that financial conditions tightened, and that the Fed should be patient on further interest rate hikes.

Meanwhile, Cleveland Fed President Loretta Mester said on Thursday that she expected the U.S. economy to continue to expand and the U.S. labour market to strengthen despite volatility in financial markets and further drop in oil prices.

There are diverging opinions of the Fed officials. It's likely that differences of opinion remain if the U.S. economic data will not improve and financial markets will remain volatile due to the slowdown in the Chinese economy and falling oil prices.

The U.S. economic data remained mixed. The services sector was weak in January, while the labour market continued to strengthen, but the pace of job creation slowed in January.

Falling oil prices are likely to continue to weigh on the U.S. inflation. The OPEC and Russia's oil output rose in January.

It is likely that the currency pair EURUSD will rise toward the resistance level at $1.1200 or at $1.1300, if the U.S. economic data will be negative or there will be negative news from China and no negative news from the Eurozone.

If the U.S. economic data will be positive and in case of the negative news from the Eurozone, the currency pair EURUSD may test the level at 1.1000.

  • Name: Konstantin Meinhardt
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