Bank of England Expected to Hold

The Fed disappointed with dovish statement

The USD dropped versus majors after the much anticipated rate hike at the end of the March Federal Open Market Committee (FOMC). The Fed raised rates by 25 basis points as expected, but did not alter economic projections and Fed Chair Janet Yellen was less hawkish than the market expected given her comments in the buildup to the policy meeting.

A week filled with central bank activity continues with the Bank of Japan (BOJ) policy rate in overnight trading to be followed by the Swiss National Bank (SNB) on Wednesday, March 16 at 4:30 am EDT (8:30 GMT) and the Bank of England (BoE) to publish its monetary policy summary at 8:00 am EDT (12:00 GMT).

The BoE is forecasted to keep the interest rate and QE amounts unchanged. Higher inflation mostly driven by food and energy prices will give fodder to the hawks that will be reflected in the minutes of the meeting published at the same time as the statement. Brexit anxiety is high with the U.K. government planning to trigger Article 50 on Tuesday will be on the minds of BoE members as Scotland is calling for a second independence referendum within a two year time frame.

The EUR/USD gained 0.622 percent in the last 24 hours. The single pair is trading at 1.0682 after the U.S. Fed raised the benchmark interest rate by 25 basis points as was expected. Members of the Fed cautioned the market that its views on the March FOMC meeting were offside back in February which was a strong hint a rate hike was coming. The EUR/USD had already priced in the telegraphed rate decision, with investors keeping a close eye on the economic projections and press conference with Chair Yellen.

The USD lost traction as the rate statement, economic projections and Yellen’s comments were less hawkish than expected given the guidance given by the Fed ahead of the March meeting.

The EUR was not able to appreciate as much as other majors on the eve of the Dutch elections. The uncertainty around the result has put a downward pressure on the currency given the probability of Freedom Party candidate Geert Wilders’ victory. Brexit and U.S. election’s polls have steered markets wrong in the last 9 months so its no surprise investors are anxious about the result. A Wilders win could pave the way for more far-right victories in particular looking ahead at the French elections in April.

The USD/JPY lost 1.04 percent on Wednesday’s trading session. The currency is trading at 113.52 after the release of the FOMC rate statement. The USD was on the cusp of breaking the 115 price level ahead of the announcement, but is near session lows at 113.52 as the Fed maintained its economic forecasts despite growing optimism about the U.S. economy elsewhere.

During the press FOMC press conference Fed Chair Janet Yellen was asked if members discussed the possible Trump administration policies such as tax cuts and infrastructure spending and she said they did not discuss them and will not do so until there are more details. The Fed has hiked once every year since 2015, but this year the hike came sooner than the market originally expected. Fed members had to drop heavy hints about their plans as they moved into a more proactive dynamic. The market was reading proactive as hawkish, but Yellen’s words have downplayed that particular reading as the Fed will not set a schedule for its monetary policy tightening leaving up the economic data to decide putting again the onus on the Trump administration to boost the USD.

The GBP/USD gained 1.08 percent in the last 24 hours. The pound gained after the Fed raised rates as expected but also signalled lack of urgency in future rate decisions. The pair is trading at 1.2287 after the Fed announcement looking ahead to the Bank of England (BoE). The BoE is expected to keep rates and QE on hold and continue its dovish outlook.
Market events to watch this week:

Wednesday, March 15
Tentative JPY BOJ Policy Rate
Tentative JPY Monetary Policy Statement
Thursday, March 16
2:30am JPY BOJ Press Conference
4:30am CHF Libor Rate
4:30am CHF SNB Monetary Policy Assessment
8:00am GBP MPC Official Bank Rate Votes
8:00am GBP Monetary Policy Summary
8:00am GBP Official Bank Rate
8:30am USD Building Permits
8:30am USD Philly Fed Manufacturing Index
8:30am USD Unemployment Claims
Friday, March 17
8:30am CAD Manufacturing Sales m/m
10:00am USD Prelim UoM Consumer Sentiment

*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza