US Market Wrap: Dollar dives on dovish FOMC statement, EURUSD soars
- AUD: Reserve Bank of Australia Governor Stevens speech 2330 GMT
- Japan: Bank of Japan Monetary Policy meeting minutes 2350 GMT
US Data released
- Initial Jobless Claims (Actual 264,000 vs. forecast 275,000)
- August Housing Starts (Actual 1.126 million vs. forecast 1.170 million)
The Federal Reserve Open Market Committee (FOMC) surprised traders (or at least half of them, when it chose to leave interest rates unchanged, and delivered a rather dovish statement. The US dollar tanked on the news although initial gains in the commodity bloc of currencies were quickly erased. The big winner was the EURUSD, which has gained 1.15% since lunch time in New York.
During the morning, US data failed to garner any trading enthusiasm due to the looming spectre of the FOMC meeting. As it was, the housing report had a soft tilt with a hefty downward revision to the July result.
WTI crude oil prices had a volatile day within a $46.50-$47.50/barrel trading range, testing both sides more than once and finally closing on the day almost exactly in the middle of the range. It will be interesting to see if Janet Yellen's expressed concerns about the Chinese economic slowdown translate into lower crude prices.
US equity indices were slightly lower at the close, with the exception of the NASDAQ, which was slightly above flat.
More than a few people believe that the FOMC got it wrong, including Saxo Bank chief economist Steen Jakobsen. See: Fed fluffs lines to beat path to US recession in Q1
China leads, markets follow ... Janet Yellen's concerns about China's slowdown could translate into lower crude oil prices. Photo: iStock
– Edited by Robert Ryan
Michael O'Neill is an FX consultant at IFXA Ltd. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.
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