Last week proved to be a rough week for the United States Dollar. This came as a surprise to many because the Federal Reserve increased its interest rate, which would generally lead to gains in the currency. However, things aren’t always as they seem, and that proved to be the case last week. So, what happened? Below, we’ll talk about the driving factor to the USD decline, how it affected the currency, and what binary options traders should be watching for ahead.
The Factor That Caused The Fall
For the USD, the declines started on March 15th, just after the Federal Reserve announced the result of the most recent FOMC meeting. That result was that the Central Bank would increase its interest rate by 25 basis points yet again. As a result, the US Fed interest rate is now 1.0%. However, increasing the interest rate wasn’t the only thing that the Fed has done.
During the statement in which the interest rate increase was delivered, cautious comments were also offered by the Federal Reserve. In particular, Federal Reserve Chair, Janet Yellen, pointed out that Trump’s policies with regard to foreign trade and more would likely have a positive impact on the United States economy. However, she cautioned that a wait and see approach is needed and that the Federal Reserve will be taking that stance with regard to monetary policy for the time being.
So, Why Did The USD Fall?
This is where things get interesting. In general, an interest rate increase at a central bank along with comments of an improving economy are good things, causing the currency associated with the news to rise. However, that wasn’t the case this time around. The USD ultimately took a dive in comparison to most other global currencies. So, what’s the big deal? Well, it lies in how the interest rate was increased.
You see, considering the overwhelmingly strong economic data that has been coming out of the United States as of late, many expected that the rate increase would be a bit larger, with promises of even larger increases to come. However, while the Fed did say that they plan on increasing interest rates in the future, they see no positive in speeding up the process with larger increases at the moment.
Ultimately, the fed made hawkish statements, but moved on a more dovish concept. While the increase in the interest does signal strength in the US economy, it is not the big move investors were expecting to see. So overall, the news was perceived as negative.
What Binary Options Traders Should Be Watching For Ahead
Moving forward, we’re likely to see several opportunities for binary options traders out of the USD. However, if you plan on taking advantage of these opportunities, you’ll need to keep a close eye on the news. In particular, continue to watch the Federal Reserve. While there was no promise of big rate hikes to come, any change in opinion of leaders of the fed will likely lead to big movement surrounding the currency. Also, continue to watch US economic data. After all, any currency can only be as strong as the economy it represents. Finally, keep a close eye on Donald Trump’s continued work as President of the United States. Anything he does with regard to the US economy and foreign trade agreements will likely have an effect on the USD. So, that’s an important topic to keep in mind.
What Do You Think?
Where do you think the USD is headed moving forward? Join the discussion in the comments below!