Article by ForexTime

The US dollar began the new trading week by strengthening after making large losses last week following a dovish Federal Reserve. The greenback experience the largest one day drop in six years last Wednesday following the Federal Reserve Open Market Committee statement (FOMC) and Fed Chair Janet Yellen’s comments that made the markets push back the timing of the first interest rate hike.

The FOMC statement dropped a reference to remaining patient as it decides on the timing of hiking interest rates above current levels of near 0%. While this appeared ‘hawkish’, the comments by Janet Yellen had a more dovish tone. There were forecasts for weaker inflation and GDP growth. The Fed expects Real GDP to grow between 2.1 and 3.1% for the remainder of 2015, while it predicted inflation of 0.6% to 0.8% by the end of the year. Also, the Fed cut its estimate for the Fed funds rate by 50 basis points to 0.625% for the end of 2015, compared to 1.125% in December’s estimate.

This week will be important for the dollar as US final fourth quarter gross domestic data (GDP) are due to be released on Friday. Inflation data on Tuesday will also be closely watched. The first estimate of fourth quarter GDP was 2.6% and was revised lower to 2.2% in the second estimate. This was much lower compared to the third quarter’s 5.0% rate. Forecasts for inflation are expected to come in negative for February.

Article by ForexTime

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