EUR/USD sank today, reaching the lowest level since November, after the US economy demonstrated faster growth than was expected. The currency pair significantly reduced its losses after the Federal Open Market Committee issued a monetary policy statement that was less hawkish than dollar bulls have hoped for.
ADP employment demonstrated growth by 218k in July, which was smaller than the predicted 234k and the June’s 281k. (Event A on the chart.)
US GDP grew 4.0% in Q2 2014. The growth was above the median forecast of 3.1%. The reading for Q1 was revised from -2.9% to -2.1%. (Event B on the chart.)
Crude oil inventories decreased by 3.7 million barrels last week and are in the upper half of the average range for this time of year. The decline was much bigger than the average analysts’ prediction of a 0.5 percent drop but smaller than the previous week’s decline by 4.0 million. Total motor gasoline inventories increased by 0.4 million barrels and are in the upper half of the average range. (Event C on the chart.)
FOMC did not surprise the Forex market today, trimming its monthly asset purchases by $10 billion — exactly as was expected. (Event D on the chart.) The Committee mentioned that “economic activity rebounded in the second quarter” and “labor market conditions improved” but at the same time “a range of labor market indicators suggests that there remains significant underutilization of labor resources”. All in all, FOMC concluded:
The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends
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