FOMC: US Dollar Edges Lower as Fed Holds Rates, Extends Repos
FED DECISION: US DOLLAR CLINGS ONTO GAINS AFTER THE FOMC LEAVES RATES UNCHANGED AS EXPECTED BUT WILL EXTEND REPURCHASE AGREEMENT OPERATIONS (REPOS)
- The US Dollar remains on its front foot after the January 2020 Fed meeting revealed that the FOMC left interest rates unchanged and stated it will continue repo operations through April
- Changes to Fed language found in the latest FOMC press statement include a less-optimistic tone regarding household spending and comments on firming inflation
- The Dow and spot Gold are extending intraday gains following the FOMC decision as traders await further details from Fed Chair Powell
As widely expected, the Federal Reserve left its benchmark interest rate unchanged at a target range of 1.50-1.75%.
Changes made to the January 2020 FOMC press statement from the central bank’s prior monetary policy update were sparse and thus warrant a muted reaction in the US Dollar so far.
Likewise, the response in the Dow Jones Industrial Average and spot Gold prices have been limited.
US DOLLAR INDEX PRICE CHART: 15-MINUTE TIME FRAME (JANUARY 28, 2020 TO JANUARY 29, 2020)
The US Dollar Index continues to trade above the 98.00 handle after eclipsing this technical barrier on the back of solid economic data yesterday.
USD price action could struggle to extend recent gains, however, seeing that the FOMC aims to extend its overnight repurchase agreement operations – or repos – at least through April.
Repo operations conducted by the Fed since September have overwhelmingly contributed to the massive $400 billion jump in total assets held by the Federal Reserve.
DOW PRICE CHART: 5-MINUTE TIME FRAME (JANUARY 27, 2020 TO JANUARY 29, 2020)
The Dow Jones Industrial Average is holding onto intraday gains thus far and could keep pushing higher with the prospect of additional liquidity injections from the Fed presenting a strong tailwind to equities.
GOLD PRICE CHART: 15-MINUTE TIME FRAME (JANUARY 28, 2020 TO JANUARY 29, 2020)
Spot gold is pressing higher on confirmation that the Fed looks to continue expanding its balance sheet, but XAU/USD prices remain about 1% off recent highs.
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