Dollar Lower After FOMC Statement and Other Top Forex News.
The dollar was mostly lower on Wednesday following this afternoons Federal Reserve statement, in which the Bank said it was leaving its benchmark interest rate unchanged at 0.00-0.25% and continued to cut its monthly bond-buying program at the current pace to $35 billion from $45 billion a month.
The Fed also nudged up their projections for short-term interest rates in 2015 and 2016 but slightly reduced their outlook for interest rates in the longer-run.
The shifts emerged from the Fed’s latest two-day policy meeting. In a statement released after the meeting, the Fed underlined an improving economic performance in the last few weeks and said it would wind down the monthly pace of mortgage and Treasury bond.
In other news, official data showed that the U.S. current account deficit widened to $111.2 billion in the first quarter of this year, the largest in 18 months, but was likely to resume its downward trend as exports accelerate. Exports fell by 1.3% during the quarter, while imports rose by 1.5%.
USD/JPY dipped 0.10% to 102.05, after rising as high as 102.31 earlier.
While the euro gained ground in late trading against the dollar, as investors avoided the greenback for most of the session.
EUR/USD closed the session up 0.17% at 1.3570.
In the U.K. the pound initially eased against the dollar following the minutes of the Bank of England’s June policy meeting.
The minutes showed that Bank of England policymakers were surprised that markets had not priced in a higher chance of an interest rate rise this year. However, they noted that the economy still needs to absorb some slack. The BoE’s monetary policy committee voted unanimously to leave interest rates on hold at their record low of 0.5%.
But the dollar pared gains following this afternoons Fed statement.
GBP/USD closed the session up 0.05% at 1.6970.
Elsewhere, the Australian dollar moved higher following the statement. The Aussie spent most of the session trading in tight ranges against the dollar, with traders nervous to make a move before this afternoons Fed statement.
AUD/USD closed the session up 0.40% to 0.9373.
The New Zealand dollar also found support following the Fed’s slightly dovish statement.
NZD/USD closed the session up 0.57% at 0.8708.
And it was a similar story for the Canadian dollar, which edged higher following the FOMC statement. The Loonie is likely to find support as the oil price continues to climb following continued unrest in Iraq.
USD/CAD closed the session down 0.01% at 1.0860.
More coverage of today’s session.
- FT: Economic activity has rebounded, says Fed. – The US Federal Reserve tapered its asset purchases by another $10bn to a monthly pace of $35bn in an upbeat statement that made no concession to signs of higher inflation.
- FT: Bank of England flags prospect of rate rise this year. – The Bank of England’s Monetary Policy Committee voted unanimously to hold interest rates at record lows this month but warned that a rise this year was more likely than markets expected.
More Top Stories:
FT: IMF calls on ECB to consider quantitative easing. – The International Monetary Fund is expected to sound the alarm on Thursday over the risk of deflation within the eurozone and to urge the European Central Bank to consider US-style quantitative easing, including “large-scale” purchases of sovereign bonds, to stimulate growth.
ABC News: Rallying Australian dollar worrying Reserve Bank, board minutes show. – The minutes from the latest meeting of the Reserve Bank board indicate the recent strength in the Australian dollar is becoming a problem for the central bank.
FT: Citi forex head Feig to quit amid spate of sellside exits. – Jeff Feig, the global head of Citigroup’s developed market foreign exchange business, is leaving the US bank after 25 years, the latest in a procession of executives to move from the sell side as forex divisions come under intense regulatory scrutiny.
Trading Floor: FOMC: Connect the dots or pin the tail on the donkey? – The biggest issue at hand for central bankers (certainly within the G7 universe) is that in the absence of strong, well managed and clearly visible governmental and fiscal policy, the ball is handed right back into their hands and they’re told, ok, now it’s your problem and you fix it.
FT: Reform or die: gold price fix under pressure. – The 117-year-old London Silver Fix is nearly dead. Is its younger but more illustrious sister going the same way?