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EUR/USD Surges After Dovish FOMC

March 20, 2019 by

EUR/USD jumped sharply today after the Federal Open Market Committee turned out to be even more dovish than was expected. While most market participants were expecting the FOMC to reduce the planned number of interest rate hikes in 2019 from two to one, the Committee actually dropped plans to hike rates this year entirely.

US crude oil inventories shrank by as much as 9.6 million barrels last week instead of rising by 0.5 million barrels as specialists had predicted. Nevertheless, the stockpiles remained above the five-year average for this time of year. The week before, the reserves decreased by 3.9 million barrels. Total motor gasoline inventories decreased by 4.6 million barrels but were also above the five-year average. (Event A on the chart.)

As was expected, FOMC left interest rates unchanged at today’s monetary policy meeting. The Committee reiterated its statement about being “patient”:

In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.

What was even more important, according to the upgraded projections, the Committee no longer plans to hike rates in 2019 and plans just one more hike in 2020. (Event B on the chart.)

Yesterday, a report on factory orders was released, showing an increase by 0.1% in January, the same as in December. Analysts had expected a bigger increase by 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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