USD Continues To Retreat After Fed’s Decision

As was widely expected, the Federal Reserve Bank held the fed funds rate steady at 0.25%, adding to earlier USD losses. The decision was a virtual certainty, considering the high unemployment rate and slow recovery. What investors were looking for was any changes in the language and hints about when the Fed is likely to raise the rates. The statement, however, disappointed those who were hoping for a rate increase sooner rather than later, as it repeated cautious comments from earlier FOMC meetings, virtually excluding any rate increase possibility in the short-term. Probably the only hawkish change was the more optimistic stance on stabilizing unemployment and, more importantly, Fed’s decision to end its program of mortgage backed securities purchase at the end of this month.

After the release, the US dollar continued its slide against other major currencies. The losses were pretty steady and somehow moderate, as the markets have already priced in Fed’s decision. The biggest gainer against dollar was the GBP, which finally was able to brake through that 1.52 level and hold it. We can expect high volume and volatility in the GBP tomorrow, as we have Bank of England’s meeting minutes and the British unemployment report coming up at the beginning of the European trading session. The other major currencies did not make any sharp movements, steadily adding to their earlier trend like gains against the dollar during last three hours.