Dollar Retreats as Fed Hikes for the First Time Since 2018

Fundamental analysis of Forex market

American stocks rose on Wednesday after signs emerged that Russia and Ukraine were making progress. According to the Financial Times, the two sides have made progress on a tentative 15-point peace plan that includes an immediate ceasefire and withdrawal of Russian troops in the country. In exchange, Ukraine will declare neutrality and accept limits on its armed forces. Ukraine will agree not to host foreign military bases in exchange for protection from countries like the US, UK, and Turkey.

The US dollar retreated after the Federal Reserve delivered its first interest rate hike since 2018. The bank decided to increase its main interest rate by 0.25%, which was in line with expectations. In a statement, Jerome Powell said that the US continues to face substantial inflation pressure. He also warned that the situation will continue in the coming months. Besides, prices of key commodities like crude oil and copper have risen substantially recently. The bank expects to deliver six more rate hikes this year.

The economic calendar will have several important events today. In the UK, the Bank of England will conclude its two-day meeting. Analysts expect that the bank will deliver another 25 basis point rate hike. This will be the first time in years that the bank has raised rates in three straight meetings. In the Eurozone, Eurostat will publish the latest consumer price index. Economists expect the data to show that the CPI rose to 5.8% in February. The other important event will be the latest interest rate decision by the Turkish central bank.


The EURGBP pair declined to 0.8390, which is lower than the weekly high of 0.8456. On the four-hour chart, the pair is slightly below the middle line of the Bollinger Bands. It has also moved slightly below the 25-day moving average while the Relative Strength Index is pointing downwards. The MACD is above the neutral level. Therefore, the pair will likely continue falling ahead and after the BOE decision.


The XBRUSD pair declined after signs of peace emerged and after the relatively weak US inventories numbers. It is trading at 97.13, which is the lowest it has been since February 28. The pair has moved below the 25-day and 50-day moving averages. The MACD has moved below the neutral level while the Stochastic oscillator is at the neutral level. Therefore, the pair will likely rebound as investors buy the dip.


The EURUSD pair held steady after the Fed decision and after signs of a deal between Russia and Ukraine emerged. It is trading at 1.1032, where it has been in the past few days. The pair has moved above the upper side of the ascending trendline. It has also formed a symmetrical triangle and moved slightly above the 23.6% Fibonacci retracement level. Therefore, the pair will likely keep rising ahead of EU inflation data.