Forex news for New York trade on March 17, 2021:
- Fed leaves rates unchanged with no changes to QE, as expected
- FOMC full statement from the March 2021 meeting
- The Feds central tendencies and dot plot for the March 2021 meeting
- FOMC full statement from the March 2021 meeting
- Fed's Powell opening statement: Economic recovery uneven, far from complete
- Powell Q&A: We want to see actual 'substantial progress' not just forecasts before taper talk
- Canada February CPI +1.1% y/y vs +1.3% expected
- US weekly oil inventories +2396K vs +2700K expected
- Canada Feb Teranet house price index 9.8% y/y vs 9.6% prior
- US Housing starts for February 1421M vs 1560M estimate
Markets:
- Gold up $14 to $1745
- WTI crude oil down 15-cents to $64.65
- US 10-year yields up 2.6 bps to 1.64%
- S&P 500 flat at 3967
- NZD leads, USD lags
There was a strong consensus heading into the FOMC that the dots would show the first hike in 2023 but that didn't happen and the dollar sold off hard with stocks rebounding from a decent selloff. Powell also emphasized transitory inflation and that the Fed wants to see strong data, not just forecasts for it.
The takeaway is that rates are pinned and there's no rush to hike them. Powell truly believes that there's no inflation in the pipeline even once the economy recovers.
The move in the dollar was initially uniform, falling about 40 pips across the board. There was some giveback ahead of the press conference but then it extended as Powell talked and even further as he finished.
It was a total whipsaw in cable, which was at the lows of the day at 1.3851 just as the statement was released. It jumped initially then extended to 1.3961, finishing at the highs.
As you would imagine, USD/JPY didn't fall as much due to upside pressure from stocks. It still fell 40 pips from the lows and down 10 pips on the day.
The commodity currency moves were particularly large, led by AUD and NZD. The Aussie was at 0.7700 at the start of the FOMC (near a session low) and ran to 0.7806.
USD/CAD fell despite softness in the oil market and the pair hit a fresh 3-year low in what's been seven straight days of selling.
