Breaking: Fed sends the USD down with dovish message
The Fed has left the interest rate unchanged as expected but has hinted it will cut interest rates. The central bank has said that uncertainties have increased. They are split on the outlook and see lower interest rates in 2019. The language is dovish while the dot-plot is cautious.
James Bullard voted for a rate cut adding to the bearish tone but was alone in his dissent.
Here is a key quote, emphasis mine:
but uncertainties about this outlook have increased. In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion
The US dollar is falling across the board. EUR/USD is trading around 1.1250, GBP/USD around 1.2650, and USD/JPY around 108.10.
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Here is the EUR/USD reaction:
Background
The Federal Reserve has been expected to leave interest rates unchanged in its June meeting but to send a hint about future rate cuts. The disappointing labor market report, stagnating inflation, and trade wars have all created expectations for another dovish tilt. Bond markets are pricing in a rate cut as soon as the Fed's next meeting in July.
However, retail sales data have been upbeat and the Washington-based institution usually refrains from abrupt changes in policy. Tension has been mounting ahead of the event.
Author
Yohay Elam
FXStreet
Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.
