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EUR/USD Declines, Pays Little Attention to FOMC Minutes

April 8, 2020 (Last updated on April 9, 2020) by

EUR/USD declined today. While FOMC minutes revealed that it does not plan to cut interest rates anymore in the foreseeable future, that cannot be the cause of the decline as the currency pair paid basically no attention to the release. Some market analysts attributed the decline to waning hopes that the peak of the pandemic is behind us. Others blamed the failure of the European Union to agree on coronavirus economic rescue.

US crude oil inventories surged by 15.2 million barrels last week, far above the forecast value of 9.8 million barrels. Stockpiles jumped by 13.8 million the week before. Total motor gasoline inventories surged by 10.5 million barrels. Both indicators were above the five-year average for this time of year. (Event A on the chart.)

FOMC released minutes of its March monetary policy meeting at which it cut its benchmark interest rate by a whole percentage point, though the release revealed that there was one dissenter who called for a smoother adjustment of monetary policy and a smaller cut by 50 basis points. (Event B on the chart.) Unsurprisingly, policymakers were concerned about the impact of the coronavirus pandemic on the economy:

The projection for the U.S. economy prepared by the staff for the March FOMC meeting was downgraded significantly from the January meeting forecast in response to news on the spread of the coronavirus at home and abroad and in response to a related substantial markdown of the staff’s foreign economic outlook, along with recent financial market movements.

As for plans for the future, it seems FOMC members believe that the huge cut should be enough to keep rates unchanged until the epidemic subsides:

These members expected that the target range would be maintained at this level until they were confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals.

Yesterday, a report on consumer credit was released, showing an increase of $22.3 billion in February. That is compared with the predicted increase of $13.9 billion and the previous month’s gain of $12.1 billion. (Not show on the chart.)

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

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