FOMC: Yellen sparks March madness – Westpac

By FXStreet Sean Callow, Research Analyst at Westpac, suggests that it has been a tough week for US dollar bulls after the EUR/USD emerged from the raft of new ECB easing steps stronger.

Key Quotes

“And now this week’s FOMC meeting has reinforced the USD decline. USD is down against all G10 currencies since the eve of the ECB meeting, led by low-yielding Scandis, CHF and EUR, with commodity currencies only middle of the pack.

Importantly for the dollar’s medium term prospects, the FOMC still expects to raise rates considerably over the next couple of years, with inflation picking up somewhat and “strong job gains”. The FOMC’s median funds rate projection is still for a 100bp increase in 2017. But whereas in Dec, the FOMC saw 100bp in tightening in 2016 as well, this has been trimmed to 50bp. Market pricing is nearer 25bp by end-2016.

The FOMC was not ready to give an all-clear on the global economy despite e.g the 15% rally in the MS Emerging Market stock index from the Jan lows, declaring that “global economic and financial developments continue to pose risks.” US net exports are judged to be “soft”, given sluggish global trade and the lagged impact of USD appreciation. …read more

Source:: FX Street