Fed’s Back-Pedaling Sinks Dollar

In the wake of the Fed’s back-pedaling rhetoric, the US Dollar fell against most major currencies during today’s session. The greenback hit a 3-week trough versus the Japanese Yen, and lost nearly .50% against the Euro and more than 1% versus the Aussie Dollar. Yesterday, the Federal Reserve announced no change to its monetary policy plans which had been expected by most analysts and FX traders. However, Janet Yellen, the chief of the Fed, essentially took a June rate hike out of the equation. She said that expectations were for moderate growth and a steady improvement to the labor sector in the US economy. What put the jinx on a rate hike, according to Yellen, are the risks stemming from “subdued foreign growth.”

As reported at 9:54 am (GMT) in London, the EUR/USD was trading at $1.1303, a gain of 0.81% for the Euro with a daily range of $1.1207 at the low and $1.1305 at the top end. The USD/JPY was down at 111.4235 Yen, down 1.21%; it had earlier hit a session low of 111.3250 Yen. The AUD/USD was trading at $0.7630, a gain of 1.22%.

Banks Expect EUR/USD Parity Despite Fed

The Fed has taken a more dovish outlook with expectations that, instead of four rate hikes this year, there will be two. Nonetheless, two major banks are still betting that the greenback will hit parity against the Euro sometime this year. Both Goldman Sachs and Deutsche Bank have reiterated that their forecasts have not changed even in light of the Fed’s more dovish stance.