Forex Today: Fed Sticks to Dovish Line

Fed sees higher growth and inflation but says current policy appropriate and unfazed by rising Treasury yields.

  • The U.S. Federal Reserve upped its growth forecast for 2021 to 6.5% from 4.2% and also indicated it expects higher short-term inflation, but made clear its majority expects to keep interest rates at zero through 2023, while Jerome Powell stated he would not react to rising U.S. Treasury Yields, as the 10-year yield hit 1.62%. The release did not create any very large movement in the market, but it pushed the U.S. dollar down to a new 2-week low while boosting major U.S. stock indices such as the S&P 500 and Dow Jones 30, which traded at new all-time high prices following the release.
  • Odds are in favor of the S&P 500 and Dow Jones 30 stock market indices continuing to rise over the coming days, as they are making new record highs.
  • In the Forex market, the U.S. dollar is now clearly weak after the FOMC release and falling against every major currency. The Australian dollar is probably the strongest currency right now.
  • The Australian dollar received an additional boost from much stronger-than-expected Australian employment data. The unemployment rate fell to 5.8% which it was expected to come in as high as 6.3%.
  • New Zealand’s quarterly GDP data showed an unexpectedly bad decrease, with its economy shrinking by 1% when it had been expected to have grown by 0.2%. However, this has not prevented a strong rise in the value of the NZD against the USD from taking place over recent hours.
  • Bitcoin is looking more bullish, as after the FOMC release it broke firmly beyond the former key resistance level at $57,223.
  • Global coronavirus deaths have fallen sharply over the past five weeks to reach a level 40% lower than the peak. However, new confirmed cases rose again last week for the third week in a row.
  • Total confirmed new coronavirus cases worldwide stand at over 121.8 million with an average case fatality rate of 2.21%.
  • Brazil is suffering from a strong wave of infections, and is currently accounting for almost one third of the entire known global coronavirus daily death toll as fatalities there hit new record highs. The Brazilian health service is severely strained and the government intends to appoint the fourth new heath minister since the pandemic began.
  • Coronavirus is spreading again in Europe leading to new lockdown measures being imposed in a few countries, notably Italy.
  • The fastest progression in terms of immunizing a population against the coronavirus in all but the smallest states has been in Israel, which has already administered a first shot of the Pfizer vaccine to 55% of its entire population and a second dose to 47% (which includes more than 90% of over-50s who have either received a shot or recovered from coronavirus). The U.A.E. ranks second, with 67 shots given per 100 people. For most of the world, a vaccine remains distant. Progress remains slow in the hard-hit European Union with not a single member state having yet fully vaccinated even 5% of its population.
  • The rate of new coronavirus infections appears to now be increasing most quickly in Andorra, Argentina, Armenia, Austria, Bahrain, Bangladesh, Bosnia, Brazil, Cambodia, Chile, Croatia, Cyprus, Estonia, Ethiopia, Finland, France, Germany, Hungary, India, Iraq, Italy, Jamaica, Jordan, Kenya, Lebanon, Mali, Moldova, Mongolia, Netherlands, North Macedonia, Norway, Pakistan, Peru, Philippines, Poland, Romania, Serbia, Sweden, and the Ukraine.
Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.