Breaking: Fed leaves policy rate unchanged, USD weakens modestly with initial reaction

The Federal Open Market Committee (FOMC) on Wednesday announced that it left the benchmark interest rate, the target range for federal funds, unchanged at 0%-0.25% as widely expected. 

In its policy statement, the Fed reiterated that it is committed to using its full range of tools to support the US economy and noted that the path of the economy will depend on the course of the coronavirus outbreak.

Follow our live coverage of the FOMC decision and the market reaction.

Fed Press Conference: Chairman Jerome Powell speech live stream – July 29.

Market reaction

With the initial market reaction, the US Dollar Index (DXY) dropped to its lowest level in more than two years at 93.31 but didn't have a difficult time staging a modest rebound. As of writing, the DXY was down 0.37% on a daily basis at 93.38.

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Fed Quick Analysis: Gloom and doom to drive dollar even lower, and stocks may finally follow.

Reality bites – and the Federal Reserve has been unable to ignore it. The resurgence of coronavirus is already evident in jobless claims and consumer confidence figures – and the Fed probably has the Gross Domestic Product figures for the second quarter, reflecting the first wave's damage. 

EUR/USD hits fresh multi-year highs after FOMC, about to test 1.1800.

The EUR/USD pair was trading at fresh multi-year highs and after the released of the decision from the Federal Reserve peaked at 1.1792 and then pulled back modestly, finding support at 1.1770.

Key takeaways from the policy statement (via Reuters)

"Ongoing health crisis will weigh heavily on economic activity, employment, and inflation in the near term."

"Economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year."

"Epidemic poses considerable risks to the economic outlook over the medium term."

"Will keep dollar swap lines and FIMA repo facility for foreign central banks open through March 31."

"Will maintain treasury and agency-backed securities purchases at least at the current pace and continue overnight and term repo operations."

"Expecting to maintain the current fed funds rate until confident economy has weathered recent events and is on track to achieve central bank's maximum employment and price stability goals."

"Interest on excess reserves rate unchanged at 0.10%."

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