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Fed Trims QE, Dollar Moves Upside

March 20, 2014 at 6:40 by Vladimir Vyun

US dollar banknotes and coinsThe US dollar surged yesterday and retained its gains today after the Federal Reserve trimmed the quantitative easing program at the planned pace and signaled that an interest rate hike may happen as soon as the next year.

As was widely expected, the Fed continued to reduce its monthly purchases at the same pace of $10 billion as at the previous meeting. The central bank’s statement was more hawkish than most analysts had expected and announced:

The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases.

The Fed also suggested that interest rates should remain low for a prolonged period of time, but most policy makers believed that borrowing costs will be increased in 2015. The projections for growth this year were revised a bit down, while the forecast for the unemployment rate was better than the December estimate.

EUR/USD sank from 1.3933 to 1.3837 yesterday and traded at about 1.3841 as of 6:35 GMT today. GBP/USD was near 1.6550 after falling from 1.6591 to 1.6538 on the previous trading session. USD/JPY climbed from 101.43 to 102.31 yesterday and was at 102.25 on the current session.

If you have any questions, comments, or opinions regarding the US Dollar, feel free to post them using the commentary form below.

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