What the FOMC Decision Means Now for the USD and its Peers

It was a volatile rate decision to say the least, however a dovish one again from the FOMC. - The central bank left interest rates unchanged at 0.0-0.25% and QE programme formalised at a minimum of $80bln/month plus $40bln/month in Mortgage-Backed Securities.

The tone from the Fed Chair Powell was dovish he reconfirmed his pledge that the Fed will continue to use its full range of tools to support the economy. His economic forecasts for this year were very bleak; expecting a 6.5% economic contraction in 2020 and acknowledged strong recent NFP numbers, but played down the importance of reading too much into one number.

What does this all mean for the markets?

USD initially came under selling pressure, seeing most of its peers advance in volatile conditions during the event, given the dovish nature of it. Gold was large beneficiary of the announcement, as the precious metal thrives when central banks are pumping money into the markets and keeping interest rates low. Stock indices had initially rallied, but the push higher was cut short.

Heading into the Asian session; USD managed to bounce and the riskier FX and other assets (stock indices) started to come under selling pressure, seeing safe-havens such as JPY and CHF gaining. Markets were somewhat disappointed by the lack of doing more from the FOMC, taking further action. Some were attributing it to the Fed's decision not to launch what was known as 'Yield Curve Control'. The measure would see the Fed actively intervene in response to rising bond yields, in order to ultimately keep the overall cost of borrowing in the economy low.



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