U.S. Session Forex Recap – September 18, 2015

  • US initial jobless claims: 264K vs. 275K expected and previous
  • US current account: -110B USD vs. -111B USD expected, -118B USD previous
  • US building permits: 1.17M vs. 1.16M expected, 1.13M previous
  • US housing starts: 1.17M vs. 1.16M expected, 1.13M previous
  • US Philly Fed manufacturing index: -6.0 vs. 6.1 expected, 8.3 previous
  • Fed keeps rates steady with Yellen remaining dovish
  • BOJ meeting minutes on tap

Geronimoooooo!!! The dollar was sold across the board, as forex traders priced in a no-rate hike decision and continued dovishness from the Fed.

Unless you’ve been living under a rock, then you should know that world markets had its spotlight firmly trained on the Fed’s monetary policy decision yesterday. I’ll spare you the long notes and give you the lowdown of what you need to get from yesterday’s announcements:

No rate hike. Global economic uncertainty and soft inflation were cited as reasons for the decision to keep rates steady. The Fed now wants to “wait for more evidence” of improvement in the labor market and its inflation projections.

Jeffrey Lacker, a sole dissenter, voted in favor of a 25-basis point rate hike.

Rate hike in October? The Fed is still open to raising rates some time this year though the decline in stock prices and a strong dollar are already tightening the markets.

Decision in numbers: 13 of the 17 decision-makers see a rate hike in 2015, three of them see it in 2016, and one expect it in 2017. Recall that in their June meeting there were 15 policymakers who expected a 2015 rate hike.

Projection adjustments: Growth is now seen to expand by 2.3% this year, down from a 2.5% uptick expected in June. Inflation expectations was also lowered from 0.7% to 0.4%, both far from the Fed’s 2.0% target. Last but not the least, long-run unemployment rate is now seen at 4.9%, down from 5.0%.

Not surprisingly, the dollar was sold across the board like it was hot potato. EUR/USD got the best deal with its 123-pip hike (+1.09%) to 1.4139 while GBP/USD also rocketed by 78 pips (+0.50%) to 1.5596 and USD/JPY fell by 103 pips (-0.85%) to 119.88.

The dollar wasn’t as unlucky against the comdolls. Whether it’s because of uncertainty over China, fast profit-taking or just a weird quirk among forex traders, major comdoll pairs like AUD/USD, USD/CAD, and NZD/USD (holler at Happy Pip!) erased most of their gains on the dollar almost as fast as they gained them.

AUD/USD popped up by 95 pips (+1.32%) to .7275 before closing at .7176 while USD/CAD fell to 1.3074 before it zoombed back up to 1.3174. Ditto for NZD/USD, which rose to .6446 before closing at .6359.

Let’s see if Asian session forex traders are more inclined to show comdoll-related volatility. Up ahead is the BOJ’s monetary policy meeting minutes. Recall that the central bank had kept its policies steady and expressed its concern over Japan’s inflation.

The minutes itself isn’t expected to make huge waves in the markets, so you might want to watch your newswires for other news events that might affect forex price action.

Good luck and good trading!

See also:

London Session Recap

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