Cable Rallies, Gold and Euro Boosted by FOMC Dovishness

Jameel Ahmad, Vice President of Corporate Development at ForexTime Ltd

There were two distinct phases for the majors in June – before and after the Federal Open Market Committee interest rate decision in the middle of the month. The US dollar moved higher against the euro in the first two weeks, rising to 1.1400 per euro from 1.1110 on the back of investor fears over Greece's debt crisis and increased anticipation ahead of the FOMC's interest rate announcement on June 17th. Then, the FOMC reiterated its dovish position on raising US interest rates while keeping the key rate at a record low of 0.25%. This disappointed the bulls, prompting a dip in USD strength and a corresponding rise in the pound sterling, euro and gold prices.

The Indian rupee (INR) made strong gains against the USD just after the FOMC played a lackluster card in the high-stakes interest rate game, going from 64.27 to 63.4 in the middle of the month. The outlook for India's GDP growth was more bullish, according to Citigroup analysts, who published a survey saying that the economy could grow by 8.1 percent in 2016-17.

Chief Market Analyst of FXTM, Jameel Ahmad, comments: Although the Indian economic outlook is impressive and there is strong optimism that its economy is likely to surpass that of China this year, the Reserve Bank of India (RBI) have continued to ease monetary policy and this is making investors bearish towards the Rupee. I am not expecting further interest rate cuts from the RBI for a while now, however if the Federal Reserve turn hawkish and begin raising US interest rates this year, this would mean that the second half of the year will spell further weakness for the Rupee.

Source : Equity Bulls

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