What happened at the Fed?
The Federal Reserve concluded its policy meeting with a divided vote, pushing the US Dollar Index to a two-week low and below the 101 level.
• The Fed kept its benchmark rate unchanged at 3.75%.
• Three of the nine voting members supported a 25-basis-point increase.
• Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan voted in favour of a hike.
• The decision extended the Fed’s longest period without a rate change since the policy cycle that began in 2008.
Expectations had risen sharply ahead of the meeting after Citadel Securities predicted that Fed Chair Kevin Warsh could surprise markets with an immediate rate increase.
The unchanged decision therefore disappointed traders who had positioned for a more hawkish outcome, triggering fresh pressure on the dollar.
What comes next?
Attention now shifts to the Bank of England and the Bank of Japan. Both central banks are expected to leave rates unchanged, but their guidance on inflation and future policy tightening could generate significant moves in GBPUSD and USDJPY.
A busy calendar of economic releases from Europe and the US could add further volatility as markets reassess the outlook for growth, inflation and interest rates.
Instruments showing notable technical momentum
GBPUSD
USDJPY
