EUR/USD Spikes Up on FOMC Policy Meeting

After rebounding from the losses of a previous day based on some clarity in regard of the Cyprus situation, the euro posted a significant bullish spike against the US dollar following FOMC meeting minutes release. The FX market demonstrated little reaction to US oil inventories report.
US crude oil inventories dropped by 1.3 million barrels last week and are still above the upper limit of the average range for this time of year. The drop followed an increase of 2.6 million barrels a week earlier and did not match 1.8 million barrel growth forecast at all. Total motor gasoline inventories decreased by 1.5 million barrels during the same period and are in the middle of the average range. During the previous week, gasoline inventories declined by 3.6 million barrel. (Event A on the chart.)
FOMC meeting concluded its two-day meeting with a new statement and quarterly economic projections. There was nothing new in the statement, but the projections were changed compared to December 2012. The Fed now expects slower GDP growth but a faster decline in unemployment, which means a sooner adoption of stricter monetary policy.(Event B on the chart.)
According to a report released yesterday, housing starts rose from the annual seasonally adjusted rate of 910k (revised from 890k) to 917k in February. Building permits rose from 904k (a negative revision from 925k) to 946k. Both indicators surpassed the analysts’ expectation for growth (915k and 925k, respectively). (Not shown the chart.)


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