The Fed tried to ignore yesterday feeble rate of growth in the first quarter saying as the same as what it has said following the meeting of 19th of March that the growth has picked up recently. However it has not surely happened because of the bad weather last winter which cooled the US economic activity.
The Fed said again everything that it will maintain rates unchanged for a 'considerable time' after the QE ends keeping its accommodative stance depending on wide range of economic indicators containing inflation which is still persisting below 2% yearly target of the Fed.
So, the Fed is watching the inflation developments carefully while the labor market is still growing by its same balanced way of recovery.
The Fed’s Decision came unanimously this time as Narayana Kocherlakota who is the chief executive officer of the Federal Reserve Bank of Minneapolis did not find what to oppose against this time as everything was expected and the Fed has mentioned its concern about having low inflation over the medium term targeting the 2% yearly in line with working on reaching the highest possible employment capacity.
The greenback which has been harmed by Q1 GDP annualized growth by 0.1% came under pressure too with the Fed’s emphasis on maintaining its current high accommodative stance by this same way which came clearer than last meeting.
The cable could renew its 4 years high reaching 1.69 yesterday and it could come over it too today with the release of Apr UK manufacturing PMI which rose to 57.3 while the market was waiting for 55.4 from 55.8 in March.
The British pound has been actually supported last month by falling of ILO unemployment rate which counts the number of unemployed workers divided by the total civilian labor force got down to 6.9% in the previous 3 months to February.
But it could not gather the required momentum to make one of its real rallies as it is still capped by the low inflation pressure in UK generally while the preliminary release of UK Q1 GDP came to show lower than expected rate of growth reached highest rate since 2007 at 3.1% yearly but it was below the consensus which was referring to 3.2% yearly after rising by 2.7% in Q4.
God willing, The cable which could form a higher low over its 200 hours moving average at 1.6805 can face in the case of rising further the psychological level at 1.7 psychological level which can be followed by 1.7041 while going down again on failing to gather up momentum again can be met by supporting level at 1.6859, 1.6805, 1.6776, 1.6760 before 1.6659 which has been reached on weaker than expected inflation data came out from UK on Last March.
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FX Market Strategist
Walid Salah El Din
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