Dollar Soars After Fed Statement and Other Top Forex News

by Joe Oliver, Forex Trading-Pips

 

Forex News Update:

The dollar strengthened against all of its major rivals today after the Fed announced interest rates would remain unchanged and bond purchases would remain steady, adding the downside risk for the U.S. economy has diminished since the autumn.

In the official FOMC Economic Projections and Monetary Policy Statement for June, the Fed also revised its economic forecasts for inflation, growth and employment.

With growth forecasts cut this year to a range of 2.3% to 2.6% down from 2.3% to 2.8%. But increased its expectations for 2014, with forecasts for GDP growth to be in a range of 3.0 to 3.5%.

Growth in 2015 is roughly in line with the March assessment from the Fed, with growth expected between 2.9 to 3.6% from 2.9 to 3.7% earlier.

The Fed expects unemployment to fall more sharply this year than first forecast, dropping to 7.2 per cent to 7.3 percent.

The outlook for inflation has also been revised to 0.8% to 1.2% this year, down from a range of 1.3 per cent to 1.7%.

Fed Chairman Ben Bernanke added during his Q&A session after the release, that the Fed will likely reduce the pace of bond purchases later this year if the economic forecasts come in as expected.

Traders reacted wildly to the news, sending the dollar higher against most major rivals, after trading in a narrow range for most of the day. At the close of the U.S. session, USD/JPY was up 1.13% at 96.41, EUR/USD down 0.82% at 1.3283 and GBP/USD down 0.93% at 1.5501.

More Coverage of the Day’s Top Story

More Top Stories:

WSJ Money Beat: As U.S. dollar gains, investors look to other currency bets. – Some investors unnerved by the U.S. dollar’s recent swings are cutting the currency out of their trades altogether.

Bloomberg: Aussie dollar holds 3-day loss versus greenback as FOMC meets. – The Australian dollar remained lower following a three-day loss against the greenback before the Federal Reserve concludes a policy meeting today.

Investing.com: NZD/USD edges higher, Fed in focus. –  The New Zealand dollar edged higher against its U.S. counterpart on Wednesday, supported by relatively positive current account data from New Zealand, while markets continued to eye the outcome of the Federal Reserve’s policy meeting.

Bloomberg: Gold rises for first time in three days as dollar drops. – Gold futures rose for the first time in three days as the dollar’s drop boosted demand for the metal as an alternative investment before the latest signals from the Federal Reserve on U.S. monetary stimulus.

Bloomberg: Canada dollar declines as Fed says economic risks have decreased. – The Canadian dollar declined after the Federal Reserve said risks to the economy have decreased even as it announced it would keep buying bonds at a pace of $85 billion a month.

–  BoE votes 6-3 to not raise stimulus in June -> Majority of MPC members see a sustained recovery -> Pound declines on a favorable inflation outlook…More at Dollar Soars After Fed Statement and Other Top Forex News.

More Reading