EUR/USD Holds onto Gains After Fed Announcement

The Federal Reserve announced today its long-anticipated interest rate lift-off. EUR/USD dipped after the event but recovered quickly, continuing to move higher. Some market analysts explained such behavior by the fact that the Fed left its economic forecasts basically the same, making it illogical to raise interest rates while inflation is expected to remain below the 2% target till 2018.
Housing starts were at the seasonally adjusted rate of 1.17 million in November, up from 1.06 million in October and above the median forecast of 1.14 million. Building permits climbed from 1.16 million to 1.29 million while analysts had expected them to stay unchanged. (Event A on the chart.)
Industrial production dropped 0.6% in November even though experts had promised it to stay flat. What is more, the October’s drop was revised from 0.2% to 0.4%. Capacity utilization slipped from 77.5% to 77.3%, below the forecast value of 77.3%. (Event B on the chart.)
Flash Markit manufacturing PMI dropped from 52.8 in November to 51.3 in December. Specialists failed to foresee the decline, predicting basically no change to the index. (Event C on the chart.)
Crude oil inventories rose by 4.8 million barrels last week after falling 4.6 million the week before. Experts had predicted a 0.3 million drop. Total motor gasoline inventories gained by 1.7 million barrels. (Event D on the chart.)
FOMC decided to increase its key federal fund rate from 0.25% to 0.5%. The vote was unanimous. (Event E on the chart.)


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