U.S. Session Forex Recap – June 16, 2016

  • FOMC kept interest rates unchanged at <0.50%
  • Fed head Yellen: Brexit was a factor in FOMC decision
  • Fed downgraded 2016 GDP forecast from 2.2% to 2.0%
  • Fed downgraded 2017 GDP forecast from 2.1% to 2.0%
  • Fed kept unemployment forecasts unchanged
  • Fed raised 2016 PCE inflation forecast from 1.2% to 1.4%
  • Fewer FOMC members expect at least two rate hikes this year
  • New Zealand GDT auction yielded no change in dairy prices
  • New Zealand GDP up 0.7% in Q1 vs. 0.5% forecast

The FOMC broke the Greenback’s heart by refraining from hiking interest rates and deciding to lower their growth forecasts for this year and the next.

Major Events:

FOMC statement – As dollar bears expected, the Fed kept interest rates unchanged at <0.50% in their latest monetary policy decision, taking the recent slowdown in employment into consideration. On a less downbeat note, policymakers pointed out that spending has strengthened and housing market conditions continued to improve.

During the presser, Fed head honcho Janet Yellen admitted that a potential Brexit was a factor in their decision. After all, the latest batch of polls have been suggesting that the lead has swung in favor of those voting to leave the EU, possibly bringing more uncertainty to the global economy and financial markets.

Meanwhile, the FOMC dot plot of interest rate projections showed that fewer officials are expecting at least two rate hikes this year compared to their previous meetings. The Fed also downgraded their GDP forecasts for this year and the next while upgrading the 2016 PCE inflation forecast from 1.2% to 1.4% to take the commodity rallies into account.

Data from New Zealand – Before U.S. session traders could call it a night, folks from New Zealand were already having their morning coffee and bracing themselves for the Global Dairy Trade auction. As it turns out, dairy prices remained flat for this week, putting a pause in the recent streak of increases.

Soon after, the GDP release showed a stronger than expected 0.7% expansion for Q1 versus the projected 0.5% growth and the previous 0.9% increase. Components of the report revealed that construction sector activity was responsible for most of the gains but that exports were down 1.0% for the period.

Major Currency Movers:

USD – Even though most market participants already expected the Fed to sit on its hands, the U.S. dollar was still dumped across the board on a less hawkish FOMC statement.

EUR/USD jumped from the 1.1210 area to a high of 1.1299, GBP/USD had a weaker climb to a high of 1.4219, USD/CHF resumed its drop from its consolidation at .9650 to a low of .9592, and USD/JPY edged lower to test support at 105.50.

NZD – The Kiwi raked in more gains thanks to upbeat GDP data, shrugging off the lack of gains in dairy prices.

NZD/USD surged from .7022 to a high of .7096 upon seeing the growth figures, NZD/JPY rose from 74.15 to a high of 75.05, EUR/NZD is down to 1.5925, and GBP/NZD is closing in on the 2.0000 major psychological mark.

Watch Out For:

See also:

Asian Session Recap

London Session Recap

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