Powell Shuts Down Taper Talk & USD
The Fed is sticking to its plan of lower rates for longer. The FOMC statement barely acknowledged the improved economic outlook and Powell followed that up with comments that left no room for a hawkish interpretation.
“It's not the time to start talking about a taper,” he said. The Fed chair also said that a transitory rise above 2% this year won't qualify as the moderate overshoot they're looking for before taping the brakes.
The US dollar responded by slumping 30-50 pips across the board. The commodity currencies were particularly strong on the day and the loonie benefited from strong Feb and March retail sales numbers. USD/CAD fell to a three-year low.
In a bit of a warning sign, US equities finished narrowly lower on the day. Note that after 4 of the previous 8 FOMC meetings, there was a substantial risk off move immediately afterwards.Looking ahead, USD/JPY may get some support from Thursday's first look at Q1 US GDP. The consensus is +6.6% annualized but risks are to the upside after Wednesday's wholesale inventories report for March beat expectations and February was revised higher. The headline though could be overlooked if personal consumption doesn't hit the +10.5%. Weekly initial jobless claims will also be released at the same time and could weigh.
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