Foreign exchange markets are a mixed bag one day after the most recent Federal Reserve meeting. Central banks in Japan and New Zealand also convened to little fanfare but it was FOMC that garnered much of the headlines, as usual. The Federal Open Market Committee (FOMC) kept rates unchanged at 0.25% on the same day it was revealed the US economy only grew at an annual pace of 0.2%. Wall Street analysts were expecting growth closer to 1.0% and as a result the US dollar continues its slide lower twenty fours later. Economic data in Europe and Asia was muted as global equities are a sea of red, seemingly very concerned over global growth prospects. The euro is Thursday’s winner, trading more than 1.2% above the overnight low.
As for yesterday’s FOMC meeting, the immediate reaction was a stronger dollar. As expected, the Fed kept rates unchanged at 0.25% and despite shaky Q1 growth – as divulged yesterday – the Committee noted some progress in the economy. The statement acknowledged that growth had slowed during the winter months, but called the factors leading this slowdown “transitory.” Inflation and employment expectations remain balanced for the duration of 2015. Perhaps the most interesting take-away was the Committee removed any hints of what lies ahead by eliminating any calendar references. Following its March meeting, the Fed noted a rate hike in April was unlikely, now the market seems to be pointing toward a September hike – but this is purely speculation. Like central banks in Japan and New Zealand, which also kept policies unchanged, it was a fairly muted reaction. Yesterday’s Q1 GDP report really stole the spotlight and continues to have the biggest impact on Thursday as the greenback is broadly lower.
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