The Federal Reserve bank concluded its two-day monetary policy meeting on Wednesday. As widely expected, rates were left at the current levels.
The central bank, in its forecasts, indicated that rates will remain at these levels. The forecasts come as the Fed previously signaled that it was done with lowering rates any further. The dollar slipped on the news.
Euro Trades Mixed on US Data
The euro was posting modest gains on Wednesday, in an attempt to maintain the momentum. On the economic front, the monthly inflation report from the US was the key mover.
Headline inflation in the United States rose by 2.1% on the year. On a monthly basis, inflation grew by 0.3%. However, data suggests that the pace of inflation growth continues to remain tame. Data from the eurozone was sparse.
EURUSD Testing Upper Resistance
The euro rose to session highs near 1.1100. However, price action is likely to remain within the range of 1.1100 and 1.1072 ahead of today’s ECB meeting.
A breakout from this range will probably set the stage for the near term direction in prices. To the downside, EURUSD is at risk of sliding to 1.1000 support. To the upside, above 1.1100 resistance, the 1.1131 level remains within reach.
Sterling in a Holding Pattern Ahead of Elections
The British pound was trading steady, holding out near the eight-month high. However, volatility could rise as the UK heads to the polls today.
Although the Conservative party is expected to win, the narrowing of the lead by the Labor party remains a risk. The UK is set to leave the EU on January 31st. Ahead of this, the Conservative party needs a majority win to proceed with the Brexit plan.
GBPUSD Volatility to Rise
The currency pair has already posted an impressive rally. The risks from the current highs remain mixed. There is scope for a correction in the near term. If the support at 1.3100 breaks, the GBPUSD could be looking to post a correction to 1.2960. To the upside, further gains could push the GBPUSD to the 1.3200 handle.
Gold Rises on Dovish Fed Outlook
The precious metal was posting some modest gains after the Fed meeting. As the Fed outlook stays dovish, it is likely that gold will remain in favor. Besides the Fed’s outlook, trade uncertainty also is a major factor. Today’s ECB meeting continues to be the main key risk in the short term.
XAUUSD Could Rise Higher
XAUUSD is likely to test the upper resistance level of 1483. Given the fact that this level has already been tested, there is a scope for a breakout higher. However, in the near term, XAUUSD is more likely to trade range-bound. Price action has been trading flat within the 1483 and 1462 levels.