Baku, Azerbaijan, May 3
By Anvar Mammadov – Trend:
The USD growth rate slowed after the decision of the US Federal Reserve to maintain the key interest rate at the level of 1.5-1.75 percent, Head of FX Strategy / Saxo Bank John Hardy told Trend on May 3.
“The FOMC statement has been picked over for significant hints, and the most significant of these was the insertion of the word “symmetric” to describe the Fed’s inflation target. The interpretation here is slightly dovish – basically in indication that the Fed isn’t about to lose its cool if inflation rises further in coming months now that the 2% target has effectively been reached. Many leading indicators and basing effects suggest inflation could rise further over the summer,” Hardy said.
Otherwise, he said, there wasn’t much else in the statement in the form of takeaways, and the USD settled largely “unchanged” after rallying to new highs ahead of the statement. and then weakening sharply – about 60-70 pips in EURUSD terms – before giving up much of the reaction.
“US yields pulled back slightly, with the 10-year benchmark off the day’s highs but remaining within the trading range of the last few sessions,” he said.
“Shortly put, the USD rally appears very much intact and ready to have a look at the next round of incoming data, including today’s April ISM non-manufacturing survey and the April jobs and, more important, earnings data on Friday. The useless (as NFP change predictor) ADP payrolls data showed jobs growth in April of +204k , about par for the course. It’s hard to believe the ISM non-manufacturing can sustain the high 50’s for much longer, but expectations are running ta 58.0 for today’s numbe,” Hardy noted.
The United States’ benchmark interest rate will remain at a range of 1.5 to 1.75 percent, the US Federal Reserve’s policy-setting Federal Open Market Committee (FOMC) said in a statement on May 2.
On Dec. 14, 2016, the Fed raised the base interest rate from 0.25-0.5 percent to 0.5-0.75 percent. This was the second increase after 2008. The decision was made given improvement in the Fed's forecasts on unemployment, inflation, as well as on US GDP growth in 2016.
Later on March 15, 2017, the Fed raised the rate to 0.75-1.0 percent, June 14 - to 1-1.25 percent and on Dec. 13 to -.25-1.5 percent.
On March 21 2018, the Fed raised the rate again - to 1.5-1.75 percent
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