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U.S. Federal Reserve Keeps Interest Rates Unchanged

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On Wednesday, the U.S. Federal Reserve kept interest rates unchanged, but strongly hinted at the possibility of a rate increase later this year as the labor market improves further. U.S. growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation, the Federal Open Market Committee (FOMC) said in its statement.

"We judged that the case for an increase has strengthened, but decided for the time being to wait," said Yellen, U.S. Federal Reserve Chair. Yellen also said, “it is better to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2% inflation.”

The U.S. dollar index fell yesterday as much as 0.5% and settled at 95.50 pips.

USD declined to ¥100 vs. JPY after the BOJ made an abrupt shift on Wednesday to target interest rates on government bonds after years of high volumes of money printing. In addition, the BOJ said it would allow inflation to overshoot its 2% target as soon as possible. Technically, the greenback is unlikely to decline further and is expected to settle at such level by the end of the day.

On Wednesday, Euro and GBP were affected by the Federal Reserve’s interest-rate decision and traded in a limited range.

Gold prices jumped yesterday and settled above the resistance of $1,330 after the Federal Reserve said it would leave interest rates unchanged. Technically, the yellow metal is expected to continue to trade in a limited range between $1,340 and $1,350 during the course of the day.

On Wednesday, Oil prices rose as much as 3% after a surprise drop in U.S. crude stockpiles. On the other hand, Oil prices jumped after the Federal Reserve left interest rates unchanged. U.S. crude settled at $45.50 at the end of yesterday’s trading session and could settle at such level by the end of the week.

The most important economic events:

  • ECB President Draghi Speaks: (15:00) – Important
  • BOE Gov Carney Speaks: (19:00) – Important

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