The Greenback wasn’t exactly in the best shape to take advantage of risk-off flows after the Fed’s statement turned out more dovish than expected. Here’s a quick recap.
United States Headlines and Economic data
- Proposed Trump-Xi summit to end trade war may be pushed back to June
- Homebuilder sentiment holds steady despite a decline in mortgage rates
- U.S. factory orders barely rise; shipments fall further
- Dollar slammed by dovish Fed; pound remains weak
- Here’s what changed in the new Fed statement
- Philly Fed manufacturing index rebounds in March; Index rises to 13.7 after plunging to -4.1 in prior month
- US weekly jobless claims fall more than expected to 221K
- The bond market is flashing its biggest recession sign since before the financial crisis
Major Market Drivers for the U.S. Dollar
Greenback price action was choppy with low volatility at the beginning of the week as trade tensions lingered in the background and traders were likely bracing themselves ahead of the FOMC decision midweek.
The Fed was already widely expected to keep policy unchanged and reiterate their plans to slow down their pace of tightening. However, the actual announcement turned out more dovish than expected as policymakers hinted that they aren’t likely to raise rates at all this year, possibly holding out until 2020 before hiking again.
Fed officials also noted that “growth of economic activity has slowed from its solid rate in the fourth quarter” after their earlier assessment that “economic activity has been rising at a solid rate.”
Furthermore, their updated economic estimates showed a lower GDP forecast of 2.1% from 2.3% this year and 1.9% from 2.0% next year. Unemployment is projected to come in at 3.7% this year from the earlier 3.5% forecast and at 3.8% next year from 3.6%.
Not all U.S. economic events turned out disappointing, though, as the Philly Fed index and initial jobless claims showed some green. These allowed the Greenback to rebound, along with persistent risks coming from Europe, but volatility remained low for the most part.