The US dollar was hurt yesterday by a report that showed the US economy almost grinding to a halt. The currency relieved some of its wounds after the Federal Reserve released its policy statement that was relatively optimistic. Today, the dollar stays flat as traders digest the news.
The Fed statement admitted that economic data was poor lately but attributed this partly to temporary factors:
Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors.
Furthermore, the central bank thought that the growth should recover in the future:
Although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate.
Yet policy makers remained cautious about timing of an interest rate hike, giving no specific data and saying:
The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.
Earlier, the dollar dropped as data showed that the US economic growth was far slower in the first quarter of this year than analysts had predicted. GDP rose by meager 0.2 percent versus the consensus forecast of 1 percent.
EUR/USD traded at 1.1112 as of 3:04 GMT today, close to the opening level of 1.1128. GBP/USD traded at about 1.5427, also not far from the opening of 1.5437. USD/JPY edged lower from 119.03 to 118.81 today after rising a little yesterday.
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