Article Highlights

  • FOMC decided to keep rates unchanged at <0.50% as expected
  • Fed stayed mum about potential June hike
  • Fed removed reference to global financial risks and higher inflation
  • U.S. crude oil inventories rose by 2 million barrels vs. 1.4 million forecast
  • RBNZ kept interest rates on hold at 2.25% as expected
  • RBNZ: Further fall in NZD is appropriate, further easing may be needed
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The Greenback tossed and turned during the FOMC decision, as the Fed made a few key changes to their statement but refrained from giving any clues about their next moves.

Major Events:

FOMC statement – Market watchers weren’t too surprised to find out that the Fed decided to keep interest rates on hold for the time being, as most were prepared to take a closer look at the actual statement to spot any hints about future policy action. Unfortunately for rate hike fans, the Fed’s tone seemed a little less hawkish than expected.

Even though policymakers seemed to think that global financial risks have subsided, their statement suggests that they’re seeing more signs of trouble on the domestic front. Fed officials assessed that growth has slowed and that inflation is no longer picking up. Since there was no release of updated economic forecasts and no scheduled press conference with Yellen, dollar traders were left guessing after the announcement.

RBNZ decision – The RBNZ also decided to keep interest rates unchanged as expected, but Governor Wheeler reiterated that further easing may be needed. As Forex Gump predicted, he also added that further Kiwi depreciation might be appropriate in order to boost inflation.

While he shared that they’ve still got plenty of uncertainties with their economic outlook, Wheeler also pointed out that New Zealand is getting support from migration, tourism, and construction. For now, the nation’s dairy sector is still facing difficult challenges and housing market pressures could also pose risks.

Major Currency Movers:

USD – The U.S. dollar initially rallied upon hearing the first few lines of the FOMC statement but soon retreated on the lack of hints about a June rate hike.

EUR/USD spiked to a low of 1.1273 then surged back to the 1.1325 area, GBP/USD dipped to a low of 1.4475 then climbed back above 1.4500, USD/JPY jumped to a high of 111.75 then pulled back to 111.09, and USD/CHF is still stuck around the .9700 handle.

NZD – The Kiwi shrugged off downbeat RBNZ remarks and ignored jawboning attempts since it already heard all that before.

NZD/USD popped up from the .6800 area to a high of .6923, NZD/JPY surged to a high of 77.26, EUR/NZD gapped down to 1.6537 to 1.6741, and GBP/NZD slipped back to the 2.1000 major psychological mark.

Watch Out For:

  • 11:30 pm GMT: Japanese household spending (-4.0% expected, 1.2% previous)
  • 11:30 pm GMT: Tokyo and Japanese national core CPI
  • 11:50 pm GMT: Japan’s retail sales (-1.4% expected, 0.4% previous)
  • 11:50 pm GMT: Japan’s preliminary industrial production (2.9% expected, -5.2% previous)
  • 1:30 am GMT: Australian import prices q/q (-0.9% expected, -0.3% previous)
  • Tentative: BOJ statement and press conference (Here’s what to expect)

See also:

Asian Session Recap

London Session Recap

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