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Dollar takes a Beating after a Dovish Fed Outlook

dollar, treasuryThe almighty US dollar came under heavy selling pressure against many of its Forex trade partners after the very dovish Federal Open Markets Committee (FOMC) monetary policy statement. The FOMC, as expected, left rates as is but took a very dovish pivot ending any hopes of a rate hike this year. They also cut forecasts. The Federal Reserve is worried about a slowing economy. The British pound was also on the back foot thanks to Brexit headlines.

The dollar index, which measures the dollar in a basket against six other Forex majors, was down during the Asian trade session. The dollar index shed 0.6 percent this morning, extending losses seen yesterday. The index was last trading at 95.806, which is its lowest level since February 4.

Looking at the benchmark USD/JPY Forex market, the USD was also down trading at its lowest level in two months.

Against the British pound, the US currency was a tad higher as the United Kingdom will be asking the European Union to extend the deadline for Article 50.  This weakened the GBP. The United Kingdom needs more time to pass an agreement in their parliament.

Traders Digest the FOMC Policy shift and sell the Dollar

This was a major pivot with monetary policy for the Fed. They took a very dovish stance ruling out any rate hikes in 2019 with one maybe coming in 2020. They also slashed their economic growth and inflation forecasts.

The Fed feels they need to guard against inflation with a more restrictive approach to monetary policy as the move forward.

About David Frank

David has his MA and PhD in Economics. He is a technical analyst who has been trading in the Forex world for over a decade. As an analyst and trader, David believes in the big picture by blending together technical analysis with the fundamentals behind the scenes in the Forex and Bond markets. David’s trading strategy is unique. He blends an understanding of fundamental and macroeconomics with technical analysis to offer a unique view into Forex. He applies several strategies including carry long positions, to take advantage of high yields in non-volatile markets, as well as using quicker, chart related analysis for day trading.

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