Dollar’s Drop After FOMC Meeting Short-Lived

Today, the Federal Open Market Committee released its last monetary policy statement this year. The US dollar dipped after the release but the drop was short-lived as the currency rebounded quickly.
The FOMC kept the phrase “considerable time” for describing the period of low interest rates, yet changed the wording so the language is now applied to the past statements. Regarding its current stance, the Committee said:

Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.

Market analysts interpreted such changes as a sign that an interest rate hike is closing. Indeed, the economic projections of the Federal Reserve showed that the majority of policy makers expect monetary tightening in 2015.
Talking about the economic outlook, the forecast for unemployment improved while inflation expectations deteriorated. The latter change was in line with today’s report that showed that consumer prices slipped into deflation.
Fed Chairperson Janet Yellen was rather hawkish at the press-conference after the gathering. The dollar was firm across the board as a result.
EUR/USD sank from 1.2509 to 1.2343 (1.3 percent) as of 20:58 GMT today. GBP/USD tumbled from 1.5748 to 1.5572. USD/JPY surged from 116.40 to 118.67 (as much as 2.0 percent).

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