The story of the week is the strength in the US Dollar. This move is definitely very meaningful and carries behind the type of real-money commitment that has finally allowed some huge technical milestones.

Plenty of markets are finally coming to life. What’s driving these sell-side flows in equities, which have finally hit hard the sentiment in Forex, where the USD has regained its dominance, is anyone’s guess.

There has been and continues to be for the most part a serious entanglement in currency flows with a very limited number of pairs exhibits congruence in trends when analyzed from a 4-hour and daily perspective. A few exceptions exist but not a whole lot. 

The US Dollar had a bad day as the FOMC-induced gains were erased to the point that the word’s reserve currency ends the day as the worst performer across the FX board even if the net daily gains/losses for in most currencies were all compressed in a paltry +/- 0.2% range.

The main takeaway from the FOMC is that interest rates in the US will be depressed at the lowest bound for longer. After all said and done, it appears as though the Fed is making it clear that it has no intentions to fiddle with the rates setting policy until at least the end of 2023 judging by the median forecast of members in the dot plot charts.

The time has come to start fully shifting the focus away from any second-tier events and be locked and loaded for the real fireworks in the form of the FOMC outcome (4.30 AEST), including both the Fed statement as well as Fed’s Chairman Powell press conference. Will the Fed continue to deliver on the ultra-dovish expectations in line with its new regime of AIT (Average Inflation Targeting) policies?

‘Risk on’ conditions made a comeback as US equities showed a much better bid on hopes of vaccines to treat COVID-19 available by th eend of the year, even if you wouldn’t be able to tell such shift in dynamics judging by the performance of the Japanese Yen, an outlier on Monday.

We kick off the week with several stories that should be left and center to start the week. What initially jumps out, without a doubt, is the sharp losses experienced by the British Pound in the last week or so as the markets prices in aggressively the scenario of a no deal Brexit. 

The big story of the day, aside from the ECB policy meeting, which ignited punchy movements in the Euro, was the continuous hammering of the British Pound. The US equity space, after a promising start, ended up succumbing once again, which in turn assisted the likes of the Swissy, Yen and USD to be bought up.

There has been a significant rebound in risk sentiment with equities once again surging. The tech heavy Nasdaq index rose by 2.7%, the S&P 500 did so over 2% and this gloomier vibes were also seen in European stocks ahead of today’s ECB policy meeting.