The Federal Open Market Committee dropped the mention of patience in its statement as was expected by majority of market participants, yet EUR/USD jumped after the announcement that should have been supportive for the dollar. There can be several explanations for such performance. One of them is that the event has been priced in. Another one is that the forecast for growth and inflation got a negative revision.
US crude oil inventories grew by 9.6 million last week to a new record, more than two times the forecast increase by 4 million. Stockpiles expanded 4.5 million in the previous week. Total motor gasoline inventories decreased by 4.5 million barrels last week, but are well above the upper limit of the average range. (Event A on the chart.)
FOMC removed the mention of ‘patience’ in its policy statement released today. (Event B on the chart.) The key phrase that replaced the previous one was:
The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.
Yesterday, a report on housing starts and building permits was released. Housing starts were at the seasonally adjusted annual rate of 0.9 million in February, a bit lower than the forecast of 1.05 million and the previous month’s rate of 1.08 million. Building permits were at the seasonally adjusted annual rate of 1.09 million compared to the predicted level of 1.07 million and the January’s 1.06 million. (Not shown on the chart.)
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