The Federal Reserve released its monetary policy statement today and it was not positive for the dollar at all, being considered by the markets as a dovish one. The greenback extended its losses against the euro and the Great Britain pound while the US currency pared its earlier gains against the Japanese yen.
The Fed left its monetary policy unchanged, in line with market expectations. The central bank also suggested that when the interest rate hike cycle starts, it will not be fast:
The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
It looks like US policy makers are unconvinced by the latest macroeconomic data that the economy is robust enough:
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.
All in all, the statement showed that the Fed prefers careful approach and patience in deciding the timing for an interest rate lift-off. Still, analysts do not necessary rule out the September rate hike, though one could argue that the event is priced in and may have a limited impact on the Forex market as a result.
EUR/USD advanced from 1.1246 to 1.1335 as of 22:45 GMT today. GBP/USD surged from 1.5646 to 1.5825 (1.1 percent). USD/JPY traded at 123.49 after rising from 123.35 to 124.44.
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