Forex news for US trading on March 16, 2016:

Fed

  • FOMC leaves Fed funds rate unchanged
  • US Fed cuts 2016 GDP forecast to 2.2% vs 2.4% prior. Dots point to 2 more hikes in 2016
  • Five things we learned from the Federal Reserve
  • Yellen Q&A: Unemployment moves now have modest effect on inflation
  • Yellen Q&A: We declined to make a collective decision that risks to the downside
  • Yellen Q&A: Fed's rate projections are not a promise for action
  • Full text of the March 2016 FOMC Statement

Other news

  • US Feb CPI +1.0% y/y vs +0.9% y/y expected
  • EIA weekly US oil inventories +1317K vs +3182K expected
  • Osborne to cut capital gains rate to 20% from 28%
  • UK to tax sugary drinks
  • US Feb industrial production -0.5% m/m vs -0.3% expected
  • UK's OBR trims inflation forecasts and adds a reality check on public spending
  • UK's Osborne says productivity growth too low
  • Canada manufacturing sales for January +2.3% vs. +0.5% est.
  • February 2016 US housing starts 1.178m vs +1.15m exp

Markets

  • S&P 500 up 11 points to 2027
  • Gold up $30 to $1263
  • US 10-year yields down 5.6 bps to 1.91%
  • WTI crude up $2.15 to $38.50
  • Commodity currencies lead, USD lags badly

Almost everyone expected some degree of hawkishness at the Fed meeting because of the improvement in February jobs and much better sentiment in markets. Instead, the Fed almost universally lowered its projections and rhetoric. The US dollar was dumped in response.

Before the decision the dollar was largely rangebound, although commodity currencies had edged higher in US trading, especially CAD after the energy inventory report boosted oil.

The Fed decision hit the dollar hard. EUR/USD immediately jumped to 1.1175 from 1.1080 and as the market digested the headlines and Yellen struck a dovish tone, it continued higher to 1.1242. We're watching the close for a finish above the March high of 1.1218.

USD/JPY fell to 113.00 from 113.70 in the initial move before sliding all the way to 112.30. It was held up, at least a bit, as risk assets improved. On the day, the yen finished as the second worst performer.

Cable had sagged earlier in the day on the budget when forecasts were lowered. It touched 1.4053 but came storming bak on the Fed and finishes the day near the highs at 1.4268.

USD/CAD was walloped and touched the lowest since early November. It had made a minor foray above 1.34 on the stronger US CPI data but plunged down to 1.3104 and is set to finish on the lows.

AUD/USD hit a one-week low of 0.7415 shortly before the Fed then sprang to a two-day high of 0.7557 afterwards. This week's high of 0.7594 is now the focus.