Chair Jerome Powell Prior to the January Interst Rate Meeting of the FOMC.
The Monetary Policy Committee of the FED gathered for its first meeting in 2020 this Wednesday when it was decided that the current economic situation does not necessitate adjustments to the monetary policy.
Thus, the interest rate was maintained at its current 1.75 per cent level, which was anticipated by most market analysts.
The surprise of the gathering, however, was the somewhat more dovish tone that was implemented by the FOMC in its post-decision statement.
In the statement, it was demonstrated partial discontent amongst the Committee’s members as regards the current state of the American economy.
One of the most significant issues was the acknowledgement that the American economy is not as resilient as it might appear at first glance.
“Although household spending has been rising at a moderate pace, business fixed investment and exports remain weak. On a 12 month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; surveybased measures of longer-term inflation expectations are little changed.”
Headline inflation is currently at 2.3 per cent, which is exceeding the 2 per cent symmetric target level that is set by the FED.
Nevertheless, the CPI index excluding food and energy continues to be somewhat subdued, which exemplifies the vulnerability of the price stability in the US.
US Inflation Rate. Image source: TradingEconomics.com
Meanwhile, the dollar continued to strengthen against other major pairs, as the spread of the deadly coronavirus internationally has prompted heightened demand for safe-haven assets.
The USDCAD broke out above the minor resistance level at 1.32070 and is currently extending the development of the markup.
The pair is trading in the upper part of the ascending channel, which is a substantial bullish indication.
Nevertheless, there is still the possibility for the formation of a false break out if the price reverts itself and breaks down below that same price level, which is currently acting as a support.
USDCAD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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