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EUR/USD Climbs After FOMC Signals About No Rate Changes in 2020

December 11, 2019 by

EUR/USD surged today following the monetary policy meeting of the Federal Open Market Committee. The FOMC left interest rates unchanged and signaled that it is not planning to make changes to the monetary policy in 2020. That was positive news to the dollar. Yet the greenback crashed against the euro nonetheless. The likely reason for that was the “buy the rumor, sell the fact” mentality as such a decision was widely expected and traders were buying the US currency ahead of the announcement to sell it afterward.

CPI rose by 0.3% in November, more than analysts had predicted (0.2%) but less than in the previous month (0.4%). (Event A on the chart.)

US crude oil inventories rose by 0.8 million barrels last week instead of falling by 2.9 million barrels as analysts had predicted. The stockpiles dropped by 4.9 million barrels the week before. Total motor gasoline inventories climbed by 5.4 million barrels. (Event B on the chart.)

Treasury budget deficit widened from $134.5 billion in October to $208.8 billion in November. The actual value was slightly bigger than analysts had predicted — $200.0 billion.

FOMC decided to leave the target range of the federal funds rate unchanged at 1.5%-1.75%. (Event C on the chart.) The Committee commented on the decision: (Event C on the chart.)

The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective.

Yesterday, a report on nonfarm productivity was released, showing a drop of 0.2% in Q3 2019. It was a bigger drop than analysts had predicted (0.1%) but smaller than registered in the previous quarter (0.3%). (Not shown on the chart.)

If you have any comments on the recent EUR/USD action, please reply using the form below.

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