There was little doubt in the market's collective mind that the Federal Reserve, which hiked rates in July, would stand pat today. It did not disappoint.
The statement itself was almost identical. Growth was said to be "strong" instead of "solid," for example, a nuance to be lost on most observers. It recognized that the unemployment rate stabilized after falling.
Most notable is what is not included. The June minutes indicated that officials were discussing how the statement should evolve as the fed funds target range approaches neutral. As we surmised, given that rates will stay at the same level until September, it did not seem likely that the Fed would change its language today. And it did not. "The stance of monetary policy remains accommodative..." There was also no reference to the weakness in the housing sector in terms of activity and prices. There was also no specific reference to the threat posed by trade.
The market reaction seemed rightfully mild. The dollar eased off its lows against the European currencies and continued to push lower against the yen after pushing above JPY112 earlier. The US yields looked little change, with some mild steepening following the sell-off in the long-end in Japan and the US refunding announcement. Stocks continued to trade heavily.
Opinions expressed are solely of the author’s, based on current market conditions, and are subject to change without notice. These opinions are not intended to predict or guarantee the future performance of any currencies or markets. This material is for informational purposes only and should not be construed as research or as investment, legal or tax advice, nor should it be considered information sufficient upon which to base an investment decision. Further, this communication should not be deemed as a recommendation to invest or not to invest in any country or to undertake any specific position or transaction in any currency. There are risks associated with foreign currency investing, including but not limited to the use of leverage, which may accelerate the velocity of potential losses. Foreign currencies are subject to rapid price fluctuations due to adverse political, social and economic developments. These risks are greater for currencies in emerging markets than for those in more developed countries. Foreign currency transactions may not be suitable for all investors, depending on their financial sophistication and investment objectives. You should seek the services of an appropriate professional in connection with such matters. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.
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