ECB Meeting

During its meeting on Thursday 14th December, the European Central Bank decided to increase both its growth and inflation forecasts for the Euro. The bank, however, decided to stick to its commitment to provide stimulus for as long as needed, expecting that the inflation would stay below target till 2020.

Despite pressure from several policymakers, the European apex bank kept its key rates on hold and also decided to keep to its intended script for next year. The policymakers were of the view that the bank should recognize the strength of the eurozone and follow the tightening steps of the U.S. Federal Reserve.

After the announcement, the Euro went up against the dollar, trading at $1.186. The price expectations were modest despite the predicted inflation being 1.7% in 2020, a figure that is short of the official target which is 2%.

As the ECB increased its growth and inflation forecasts by a wide margin, the bank didn’t bring up the topic of its policy, pointing to the fact that their policies will remain unchanged.

Fed Lifts Interest Rates

On Wednesday, the U.S Federal Reserve bumped up its interest rate by 0.25%, a move that was expected. The Fed, however, decided to leave its rate forecast for the next few years unchanged as policymakers expected a short-term acceleration in the economic growth of the country.

The Fed also anticipates three further rates hike in 2018 and three more in 2019, after which the long-run level of 2.8% is expected to be attained. After the announcement, the USD fell against the majority of the currencies before picking up on Thursday, gaining against major currencies like the Euro.

The gross domestic product growth for 2018 now stands at 2.5%, an increase from the 2.1% forecasted back in September. The growth rate though is expected to slow down to 2.1% in 2019, a bit higher than the 2% earlier forecasted.

China’s Central Bank Raises Rate to Defuse Financial Risks.

The People’s Bank of China on Thursday raised its money market rates with the aim of shaking off financial risks without affecting the economy. The economy of the country has cooled off over the past few months as the government started taking more actions against high-risk lending and polluting factories. This move indicates that the Chinese central Bank plans to keep its policy tighter next year.

The bank also decided to increase its rates on reverse repurchase agreements by five basis points for the 7-day and 28-day tenors. Its one-year medium-term lending facility also went up by five basis points.

Even with these rates hikes by the PBOC, analysts are of the view that the economic activities in the country wouldn’t be affected.

Bank Decision and Forex

In light of all these bank decisions along with other political and economic factors, the Forex market has been trading in a tight range followed by sharp and sudden swings as the market, banks, institutions and large financial participants digest the global economic and political situation. The Forex market will continue its trend of lackluster trading conditions as we step into the holiday season trading slow down. Our Forex Signal Trading Team takes this into consideration when sending Forex signals to our subscribers worldwide.