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Breaking news

Federal Reserve Leaves Interest Rates Unchanged, Maintains Monthly Asset Purchases

Real Time News
  • Fed's Powell: - Transitory means not impacting longer-run inflation patterns - We must be extremely careful when it comes to the inflation mandate
  • Fed's Powell: - Fear of COVID and unemployment benefits are keeping people from working - Such a high vacancy-to-unemployed ratio is rare
  • Fed's Powell: - We are not looking at raising rates, but instead asset purchases - Ideally you would not be raising rates before tapering
  • @CVecchioFX @RiskReversal @GuyAdami Gold is headed back to the bar for another bender #LowerForLonger
  • Fed's Powell: - Move in yields not pinned on one single factor - Technical factors, movements in real yields shifting bond market
  • Fed's Powell: - In the near-term, risks to inflation are tilted to the upside - If inflation continues to rise above the Committee's goal, Fed will use its tools to guide inflation lower
  • $USD bearish break, now at LOD next support 92.19-92.26 https://t.co/KE2gP6Q1Xs https://t.co/DmMGL9byme
  • Gold and the US Dollar whipsawing in wake of the Fed statement and press conference hosted by Chair Powell. Statement said the economy has made progress toward its goals, but Powell just expounded on this by saying "we are still a ways away from *substantial* progress on jobs." https://t.co/qVy8rpIn86
  • Fed's Powell: - We are not near a discussion on raising interest rates - Economic recovery remains extremely uneven
  • So, either the Fed announces Taper soon and markets will evaluate that through the risk lens or they will have to push it back because they are troubled by economic issues such as the covid risk they highlighted. Either way, serious dancing to keep risk appetite steady
Balance Sheet Normalization Program Coming "Relatively Soon" According to FOMC Minutes

Balance Sheet Normalization Program Coming "Relatively Soon" According to FOMC Minutes

Dylan Jusino,

Talking Points

- The Committee intends to begin implementing the balance sheet normalization program ‘relatively soon’

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

After the release of the July FOMC minutes, investors were left with an unclear picture as to when the Fed will begin unwinding its 4.47 trillion USD balance sheet. Overall, the Fed’s comments were dovish.

In the minutes,

“Members agreed that, at this meeting, the Committee should further clarify the time at which it expected to begin its program for reducing its securities holdings ina gradual and predictable manner. They updated thepostmeeting statement to indicate that while the Committeewas, for the time being, maintaining its existingreinvestment policy, it intended to begin implementing the balance sheet normalization program relatively soon, provided that the economy evolved broadly as anticipated.

As the Federal Reserve looks to gradually exit the market it may have adverse impacts on capital markets. For now, traders can expect that the Fed will be especially cautious as it tries to avoid another "taper tantrum."

Chart 1: DXY Index 15-minute Timeframe (August 16, 2017 Intraday)

.

Leading up to the release of the minutes DXY dips below a short-term trend line. After the release, DXY continues to fall below 93.89 and traded around 93.51 at the time that this article was written.

--- Written by Dylan Jusino, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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