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Federal Reserve Leaves Interest Rates Unchanged, Maintains Monthly Asset Purchases

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  • Update - gold extending its rally to session highs as the US Dollar continues to slide following this comment from Powell. The Fed Chair also stuck to his transitory inflation script during the presser. Meanwhile, real yields just hit new all-time lows. $GLD $DXY $XAUUSD https://t.co/GEpIKpttUs
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  • Fed's Powell: - No sense of panic in regard to inflation - I do not believe wage increases are causing price inflation
  • Fed's Powell: - High inflation prints not "what we were looking for" - Spike in inflation driven solely by supply side shock
  • Fed's Powell: - We expect RRP activity to remain elevated - Repo facilities performing as expected
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  • Fed's Powell: - Strong capital requirements are a "must" for banks, especially the largest banks - Capital requirements allow banks to continue to perform during severe downturns
  • The July FOMC press conference is hammering home this point: the labor market mandate is now on equal footing with the inflation mandate (which is atypical); and Powell is now making the case that the labor mandate is *more important* to normalization than the inflation side. https://t.co/saAmTwpTRw
EUR/USD Risks Higher High on Dovish Fed- GBP/CAD Eyes Key Resistance

EUR/USD Risks Higher High on Dovish Fed- GBP/CAD Eyes Key Resistance

David Song, Strategist

Talking Points:

- USDOLLAR Hit by Dismal 1Q GDP; All Eyes on FOMC

- EUR/USD Threatens Bearish Momentum; Higher High on Tap?

- GBP/CAD Eyes 1.8640 Resistance as Pair Carves Higher Low in April

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) is under pressure ahead of the Federal Open Market Committee (FOMC) interest rate decision as the advance GDP report showed a marked slowdown in the first-quarter, and the reserve currency may track lower going into the following as it appears to have carved a lower high in April.

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10444.09

10476.43

10437.31

-0.29

130.52%

Indeed, the marked slowdown in the headline GDP reading may boost the Fed’s argument to retain its highly accommodative policy stance for an extended period of time, but the stickiness in the Core Personal Consumption Expenditure, the Fed’s preferred gauge for inflation, paired with the resilience in Personal Consumption may put increased pressure on central bank to normalize monetary policy sooner rather than later as the data undermines the risk for disinflation.

Nevertheless, there remains a limited risk of seeing a major shift in the Fed’s policy outlook as Chair Janet Yellen remains reluctant to move away from the zero-interest rate policy (ZIRP), and the dollar may continue to give back the advance from back in October (10,354) should the committee merely reiterate the policy statement from the March 19 meeting.

EUR/USD Risks Higher High on Dovish Fed- GBP/CAD Eyes Key Resistance

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Read More:

Price & Time: Too Much "Hope" in USD/JPY?

EURJPY Scalps Target Critical Support at 141

USDOLLAR Daily

EUR/USD Risks Higher High on Dovish Fed- GBP/CAD Eyes Key Resistance

Chart - Created Using FXCM Marketscope 2.0

  • Risks Fresh Yearly Lows as USDOLLAR Carves Lower High in April
  • Interim Resistance: 10,602 (38.2 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,406 (1.618 expansion)

Release

GMT

Expected

Actual

MBA Mortgage Applications (APR 25)

11:00

--

-5.9%

ADP Employment Change (APR)

12:15

210K

220K

Gross Domestic Product (Annualized) (1Q A)

12:30

1.2%

0.1%

Personal Consumption (1Q A)

12:30

2.0%

3.0%

Gross Domestic Product Price Index (1Q A)

12:30

1.6%

1.3%

Core Personal Consumption Expenditure (QoQ) (1Q A)

12:30

1.2%

1.3%

Employment Cost Index (1Q)

12:30

0.5%

0.3%

ISM Milwaukee (APR)

13:00

56.00

47.26

Chicago Purchasing Manager (APR)

13:45

57.0

63.0

Federal Open Market Committee Interest Rate Decision

18:00

0.25%

Fed QE3 Pace

18:00

$45B

Fed Pace of Treasury Purchases

18:00

$25B

Fed Pace of MBS Purchases

18:00

$20B

Click Here for the DailyFX Calendar

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David's e-mail distribution list, please follow this link.

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