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EUR/USD Falls as FOMC Refrains from QE, Sees Economic Recovery

March 14, 2012 by

EUR/USD fell yesterday and continued its decline today after the FOMC refrained from adding stimulus for the US economy, as some analysts expected it would do. Moreover, the Committee changed its assessment for pace of the US economic recovery from “modest” to “moderate”. The news boosted the dollar that was already advancing after the positive retail sales report.

Retail sales rose 1.1% in February from the previous month, exactly as forecasters predicted. The January change was revised upwardly from 0.4% to 0.6%.

Business inventories increased 0.7% in January from December. The actual value was above the predicted figure of 0.5% and the December reading of 0.6% (revised from 0.4%).

The minutes of the Federal Open Market Committee monetary policy meeting showed that the FOMC views the US economy as recovering at moderate pace:

Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated.

The US central bank refrained from additional quantitative easing and kept the main interest rate unchanged near zero.

On Monday, a report about treasury budget balance was released, showing that the deficit increased from $27.4 billion in January to $231.7 billion in February, in line with forecasts.

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

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