US Dollar & Fed Rate Decision:
- The Federal Open Market Committee[1] announced it would not change the Federal Funds rate, fulfilling market expectations
- Given the action at recent rate decisions, December’s meeting offered the Fed an opportunity to monitor data under the new policy landscape
- Critically, the Fed signaled rates will be on hold through 2020 but potential for a single hike in 2021
- US Dollar Outlook Bullish Ahead of FOMC, Retail Sales, CPI[2]
US Dollar Steady, Stocks Tick Higher Following Fed Rate Decision
The US Dollar[3] spiked before quickly leveling off following the Fed’s December rate decision, at which the central bank announced it would maintain the current interest rate range of 1.50% to 1.75%. To gauge the impact of recent Fed rate decisions, central bank officials announced they would continue to monitor the effect of monetary policy on the economy and removed reference to “uncertainties” in the outlook statement. Further, the meeting revealed most officials see the Federal Funds rate on hold throughout 2020.
US Dollar Price Chart (DXY): 5 - Minute Time Frame (December 2019) (Chart 1)
With that in mind, the December meeting looks to have compounded the Fed’s previous position and has effectively placed the central bank in a holding pattern as economic data continues to trickle in. The relatively uneventful decision saw the US Dollar fluctuate mildly before settling around 96.30.
Dow Jones[4] Price Chart: 1 - Minute Time Frame (December 2019) (Chart 2)
In the case of the Dow Jones, the meeting’s passing has removed a key risk for the index as it attempts to rebound to record levels. Looking ahead, the Industrial Average’s focus will now likely shift to the December 15 tariff deadline.
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