Sterling hits ten-month high as dollar dips on Fed

Sterling hits ten-month high as dollar dips on Fed

The Federal Reserve opted to keep the current federal funds rate as-is today at its Federal Open Market Committee meeting.

Markus Schomer, chief economist at Pinebridge Investments, described it as one of the "most boring" Fed statements he'd seen in some time. They noted that unemployment rate has declined since the beginning of the year.

But Innes stated that such hint from the Fed is not that big of a shock and might not help much in lifting the USA dollar adding that it will be the inflation language where a potential dovish shift will appear.

The central bank plans to start scaling back its $4.5 trillion portfolio of bonds it accumulated while trying to boost the economy after the Great Recession in 2008.

Although the earnings calendar was busy, investors spent much of the day looking ahead to the FOMC rate announcement late in the session, in which the committee stood pat on rates as expected.

The Fed will increase those caps by $6 billion every three months, until the bank is selling off $30 billion in Treasury bonds and $20 billion in debt each month. It is now trying to raise costs to reduce those incentives.

By the end of the year, the Fed projects that rates could return to a level that would neither encourage nor discourage economic activity.

Robb Soukup is a freelance journalist who previously covered the banking sector and The Fed for S&P Global Market Intelligence.

Investors raised their long positions in most Asian currencies compared with two weeks ago, with bullish bets on the Chinese yuan at their highest since December, a Reuters poll showed on Thursday, as the dollar languished near multimonth lows on political woes in Washington.

Since then, however, some Fed officials have expressed concern about continued weakness in inflation. They engaged in a bit of coordinated warning on rising asset prices and risk appetite last month, with Yellen herself calling them "rich" and San Fran Fed President John Williams arguing the stock market was "running on fumes".

And while inflation is expected to remain under the central bank's 2% target in the coming months, the statement repeated the view that it is expected to "stabilise around the committee's 2% objective over the medium term".

During the April-June quarter, the economy is generally thought to have grown at an annual rate of about 2.5 percent. But with the Fed under no immediate pressure to act, policymakers are likely to adopt a wait-and-see posture.

The Fed's statement Wednesday coincides with a period of lackluster growth for the US economy.

Forthcoming data will be crucial in determining the Fed's next move with strong growth and inflation data needed to shift market sentiment.



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